August Industrial Production

◆The August 2014 indices of industrial production declined for the first time in two months at -1.5% m/m, while at the same time falling considerably below market consensus (+0.2%). The previous month’s production forecast survey announced a positive forecast for the months of August and September, expecting production to hit bottom soon, but August results turned out more negative than had been expected.

◆As for production by industry in August, ten out of the total of fifteen industries experienced declines. As for contribution to overall production figures, the general purpose, production & business oriented machinery industry (-7.4% m/m), the transport equipment industry (-3.8%), and the electrical machinery industry (-3.2%) did much to push overall results down. The decline in transport equipment was pretty much in line with last month’s production forecast survey. However, the decline in the general purpose, production & business oriented machinery industry was larger than expected, and the electrical machinery industry declined despite the forecast for growth in last month’s survey.

◆According to METI’s production forecast survey, a rapid recovery is expected in industrial production in September (+6.0%) though a slight decline will be seen again in October (-0.2%). As for September production plans by industry, all industries except for iron & steel are expecting growth, with the processing industries expecting especially high growth. If we ignore information and communication equipment and general purpose, production & business oriented machinery, which have had considerably negative achievement rates up to now, plans for the transport equipment industry to increase production after a period of declines can be seen as a very positive factor. As for October, most industries are forecasting reactionary declines after the gains of September, while in contrast, general purpose, production & business oriented machinery and electrical machinery are expecting growth for the second consecutive month, providing support for overall performance.