September Industrial Production

◆The September 2015 indices of industrial production was up by +1.0% m/m, its first increase in 3 months, considerably exceeding market consensus (-0.6%). Results exceeded the upper limit of market expectations. Activity centered on the consumer goods sector brought in favorable results. The shipment index was also up for the first time in 3 months at +1.3% m/m, while the inventory ratio index fell for the first time in 2 months at -2.9%.

◆As for the future of industrial production, the growth trend is expected to return despite ups and downs along the way. First, in the area of domestic demand, recovery is expected for consumption, reflecting the improvement in real income for both working households and pensioners. Meanwhile, corporations have not lost their willingness to invest in domestic capex, and this should provide underlying support for demand in the area of capital goods. Overseas demand is expected to remain weak for the time being, but exports are expected to gradually recover with a mixture of both strong and weak points. In the US, economic growth continues with a strong undertone especially in the household sector. Exports to the US are expected to recover and reenter a growth phase centering on durable goods. In the Eurozone, the trend toward recovery is expected to continue, supported by cheap crude oil and the ECB’s quantitative easing. As for the Asian economy, China’s ratio of cash reserves to deposits has been lowered along with its interest rates, and there are signs that the real economy has hit bottom. It is very possible that soon there will also be signs of hitting bottom for various goods, centering on consumer goods.