November Industrial Production

◆The November 2014 indices of industrial production suffered a decline for the first time in three months at -0.6% m/m, while at the same time falling below market consensus (+0.8%). However, the extent of the decline is small and we continue to believe that all in all, production is still on its way to a comeback.

◆As for production index performance by industry in November, eight out of the total of fifteen industries experienced declines. Contribution to overall decline was most notable in the areas of general-purpose, production and business oriented machinery (-3.5% m/m), electrical machinery (-2.3%), and fabricated metals (-3.7%). Considering the major gains which both general-purpose, production and business oriented machinery and electrical machinery made during the previous month, declines were fairly minor. Moreover, future production plans beyond the month of December call for growth. Hence these results need not be viewed overly pessimistically.

◆According to METI’s production forecast survey, industrial production is expected to pull off a v-shaped recovery, with December production plans seen up +3.2% m/m and January 2015 seen up +5.7%. At the same time, looking at the forecast revision rate and realization rate, both of which continue to record negative numbers, this forecast for industrial production can be taken with a grain of salt. But despite this, we believe that growth in production looks promising in the months beyond December.