February Industrial Production

◆The February indices of industrial production grew by +2.0% m/m, while exceeding market consensus at +1.2%. This is the first time in two months that the index of industrial production has achieved growth. The February shipping index was down for the first time in two months at -0.1%, with the inventory index growing for the first time in two months at +0.9%. Inventory ratio fell for the first time in three months at -0.1%.

◆The previous month’s results were contrary to market expectations, falling into a decline. However, this month’s results suggest that the trend toward production increases since the beginning of 2016 is maintaining. Meanwhile, production plans for April show considerable strength at +8.3% m/m despite indications of a downward trend approaching, meaning that figures should be taken with a certain grain of salt.

◆The METI production forecast survey sees March performance down by -2.0% m/m, but then major growth in production in April at +8.3%. METI’s estimated forecast value for the March Indices of Industrial Production indicates a decline of 0.3%.

◆Production is expected to experience moderate growth in May 2017 and beyond. Durable consumer goods are expected to maintain a steady undertone, with major household appliances purchased when the ecopoint incentive program was introduced approaching the culmination of their replacement cycle. In addition, the negative effects of preconsumption over demand as a result of last minute demand prior to the increase in consumption tax are gradually falling away. As for overseas demand, recovery is seen continuing for overseas economies, especially the US economy which continues to maintain underlying strength centering on the household sector. Exports are expected to make a gradual comeback.