November Industrial Production

◆The November 2016 indices of industrial production grew by +1.5% m/m, while falling below market consensus at +1.7%. Meanwhile, the November shipping index was up for the third consecutive month at +0.9%, with the inventory index falling for the third consecutive month at -1.5%. Inventory ratio declined for the second consecutive month at -5.5%. As for production index performance by industry, contribution to positive results was especially high for general-purpose, production and business related machinery (+3.3% m/m) and transport equipment (+2.0%). While production and shipments continue to achieve growth, inventory adjustment progresses, indicating that recent industrial production is maintaining a favorable trend.

◆The METI production forecast survey sees December performance up by +2.0% m/m with January production up by +2.2% in a continuation of production increases. However, METI’s estimated forecast value for the December Indices of Industrial Production is marking time at 0.0% in comparison to the previous month. Hence caution is required.

◆Production is expected to continue experiencing ups and downs in February 2017 and beyond. Personal consumption is expected to mark time due to sluggish growth in disposable income for working families and household income for pensioners. In addition, while operating rates of production facilities continue to grow, levels have yet to recover completely, 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 favorability, overall demand is expected to mark time.