July Industrial Production

◆The July 2014 indices of industrial production rose for the first time in two months, up +0.2% m/m, while at the same time falling below market consensus (+1.0%). July growth was limited after the previous month’s major decline. Production has been slowing down since its peak in January 2014. The inventory index was up +0.8% m/m, its third consecutive month of gains, while the shipment index rose by +0.7% m/m, its first advance in six months. Meanwhile, the index of inventory rate fell for the first time in three months at -2.3% m/m.

◆As for production by industry in July, eight out of the total of fifteen industries saw growth. Contribution to growth in overall production was greatest from the general purpose, production & business oriented machinery industry at +6.3% m/m, petroleum products (+3.1%), and textiles (+1.3%). Industries which saw a decline in the index were transport equipment (-2.5%), information communication equipment (-6.9%), and chemicals (-1.9%), which pushed results down lower than they might have been. Poor performance in transport equipment and information communication equipment was a repetition of last month’s production forecast survey. However, the extent of the decline experienced by the transport equipment industry was greater than expected, while the chemical industry suffered declines despite last month’s outlook for growth. As a result, growth in industrial production overall was less than had been hoped for.

◆According to METI’s production forecast survey, a comeback is expected in industrial production, with August production schedules expected to grow +1.3% m/m and September up +3.5% m/m. As for August production plans by industry, declines are seen for general purpose, production & business oriented machinery and transport equipment, but all other industries are expected to see increases in production. As for the September outlook, declines in production are seen for the materials industry. However, positive developments in the processing industries are expected to bring up the overall numbers. Especially positive is the outlook for growth in the transport equipment industry, the first it has seen in four months during which time it experienced continued declines.