May 2021 Industrial Production

◆The May 2021 indices of industrial production declined by -5.9% m/m, while at the same time falling below market consensus at -2.1%, recording its lowest level since December 2020. In addition to the major decline in production of motor vehicles as a result of the shortage in semiconductors, a broad range of industries experienced reactionary declines in response to the previous month’s growth, including production machinery and electrical machinery, and information & communication electronics equipment.

◆As for the future of industrial production, moderate growth is expected. Progress in the normalization of economic activity due to worldwide dissemination of the COVID-19 vaccine is expected to provide a push for production growth in a broad range of industries. Meanwhile, growth in production of semiconductors, such as integrated circuits and so on, as well as semiconductor manufacturing equipment is expected as a means of handling the worldwide shortage in semiconductors. Production of motor vehicles is also expected to make a comeback, but the recovery is expected to be moderate until around July due to the influence of damage from a fire experienced at the factory of a subsidiary of Renesas Electronics. The Ministry of Economy, Trade and Industry’s Production Forecast Survey sees June 2021 production up by +9.1% in comparison to the previous month (+5.4% corrected for production plan bias, mode). Meanwhile, July is expected to be down by -1.4%.

◆The May Indexes of Business Conditions is to be published on July 7, and the composite indexes, the leading index, is expected to be down by -1.4pt to 102.4, while the coincident index is expected to be down by -2.6pt to 92.7. Based on the predicted value, the assessment of coincident index should be automatically leaved unchanged at “improving.”