October Industrial Production

◆The October 2015 indices of industrial production was up by +1.4% m/m, its second consecutive month of growth, but came in below market consensus (+1.8%). The shipment index was also up for the second consecutive month at +2.1% m/m with a growth rate above that of the production index, also for the second consecutive month. As a result, progress was made in inventory reduction, thereby putting the inventory ratio at -1.9% m/m and the inventory ratio index at -3.0%, the second consecutive month of decline for inventory.

◆As for industrial production in November and December, 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.