August 31, 2017
Summary
◆The July indices of industrial production recorded a decline of -0.8% m/m, while at the same time falling below market consensus at -0.3%. The July shipping index was also down for the first time in two months at -0.7%, while the inventory index fell for the second consecutive month at -1.2%. The inventory ratio grew for the first time in three months at +2.4%. The METI production forecast survey sees August performance up by +6.0% m/m, and September down by -3.1%.
◆While the July indices of industrial production fell below market consensus, the extent of decline was small, and production is actually maintaining a high level of performance. Favorable domestic demand and two consecutive months of inventory decline appear to have led to plans for production increases in August.
◆Production is expected to experience moderate growth in October 2017 and beyond. Capital goods will remain promising throughout the rest of the fiscal year due to capex spending in the area of maintenance & repair, 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 new model cars centering on light weight vehicles gaining from the effect of introducing new models, and major appliances reaching the culmination of their replacement cycle.
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