June Industrial Production

Growth trend in production confirmed

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  • Kazuma Maeda
  • Shunsuke Kobayashi

Summary

◆The June indices of industrial production recorded growth of +1.6% m/m, for the most part in tune with market consensus at +1.5%. The June shipping index also grew for the first time in two months at +2.3%, while the inventory index fell for the first time in seven months at -2.2% along with the inventory ratio, which declined for the second consecutive month at -2.1%. The METI production forecast survey sees July performance up by +0.8% m/m, and August also up by +3.6%.


◆Both production and shipments registered growth, while inventory declined, putting the amendment ratio of the July forecast on the plus side, with August also expecting production growth. Considering these developments the overall assessment is a good one. The June result now puts the Apr-Jun period at +1.9% q/q. Growth was sluggish during the Jan-Mar period at +0.2% (+1.8% during the Oct-Dec period), but the pace of production appears to be accelerating due to a comeback for personal consumption and capex.


◆Production is expected to experience moderate growth in September 2017 and beyond. Capital goods are expected to see an increase in production due to favorable orders, but caution is required regarding the future, as it is unknown whether the growth trend in operating rate can be maintained. 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.

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