September Industrial Production

◆The September 2016 indices of industrial production marked time at +0.0% m/m, meanwhile falling below market consensus at +0.9%. The September shipping index was also up for the first time in two months at +1.1%, while the inventory index fell for the first time in two months at -0.4%. Inventory ratio grew for the first time in two months at +1.5%. Overall production experienced major downward pressure from declines in the information communication & electronic equipment industry, as well as in electronic parts & devices, but both production and shipments show signs of a comeback in general-purpose, production and business related machinery, and transport equipment, bringing those industries favorable results in the end.

◆The METI production forecast survey sees October performance up by +1.1% m/m with November up by +2.1%. Production is expected to continue growing in the future. One positive element is that production is expected to recover for information communication & electronic equipment, and electronic parts & devices, both which suffered major declines in production in September.

◆Production is expected to continue experiencing ups and downs in December and beyond as well. 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.