August Industrial Production
Shipments decline even as production grows. Performance differs widely from industry to industry
September 30, 2016
Summary
◆The August 2016 indices of industrial production grew for the first time in two months by +1.5% m/m, while at the same time exceeding market consensus at +0.5%. Meanwhile, the shipping index declined for the first time in three months at -1.3%, while the inventory index grew for the first time in two months at +0.1%. Inventory ratio declined for the first time in two months by -3.5%. Production grew while shipments declined and inventory grew just slightly, producing results which are not necessarily positive. Inventory accumulation occurring in some industries, including general-purpose, production and business related machinery and chemicals (minus pharmaceuticals), is considered to be behind the mediocre performance. However, electronic parts and devices, as well as information communication & electronics equipment and non-ferrous metals achieved growth in both production and shipments, thereby maintaining a firm undertone. Results can be said to have shown the strengths and weaknesses of various industries.
◆The METI production forecast survey sees September performance up by +2.2% m/m, with October continuing the growth in production at +1.2%. However, it is highly likely that those industries where inventory accumulation was seen on the August report will need time for inventory adjustment in the near future. Hence performance is expected to continue marking time.
◆Production is expected to continue experiencing ups and downs in November and beyond. Meanwhile, personal consumption is expected to mark time due to sluggish growth in disposable income for working families and household income for pensioners. In addition, the earnings environment for corporations is worsening due to the progressively strong yen, and this will very likely narrow the focus of domestic capex to labor-saving as a means of handling the shortage in manpower, research and development, and energy-saving. As for overseas demand, though some goods are expected to maintain a firm undertone, overall demand is expected to mark time.
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