August Industrial Production

◆The August indices of industrial production recorded growth of +2.1% m/m, while at the same time exceeding market consensus at +1.8%. The August shipping index was also up by +1.8%, while the inventory index fell by -0.6%. Meanwhile, the inventory ratio declined by -4.3%. The METI production forecast survey sees September performance down by -1.9% m/m, and October up by +3.5%.

◆In addition to the August indices of industrial production achieving positive performance, inventory declined and the growth trend in production was maintained due to favorable domestic demand and positive performance for exports. According to the METI production forecast survey, a decline in production is expected in September, but October is seen making a comeback with a return to production growth. Hence there is no need for pessimism in regard to the September outlook.

◆Production is expected to experience moderate growth in November 2017 and beyond. Capex spending in the area of maintenance & repair remains promising throughout FY2017, but caution is required as it is unknown whether the growth trend in operating rate can be maintained. Meanwhile, 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.