–METI Survey: Factory Output Likely to Rise 4.0% in July, 0.7% in August
— Japan Q2 Core Capital Goods Shipments +0.5% Q/Q Vs. -2.0% in Q1, Indicating Capex Rebound in Q2 GDP
–Japan Q2 GDP Forecast to Post Modest 2% Annualized Growth After 2.9% Slump in Q1
–METI Keeps View: Output Has Weakened While Taking One Step Forward, One Step Back
By Max Sato
(MaceNews) – Japan’s industrial production slipped a seasonally adjusted 3.6% on the month in June, giving up all of the sharp 3.6% rebound (revised up from 2.8%) in May, hit by more revelations of false safety test records in June, this time at Toyota Motor itself, instead of its subsidiaries, as well as at other major automakers, preliminary data released Wednesday by the Ministry of Economy, Trade and Industry showed.
The decline was smaller than the median forecast of a 4.9% slump and all of the forecasts that ranged from 5.5% to 4.0% drops. The first decrease in two months was also driven by production machinery (semiconductor-making equipment and excavators) as well as general machinery (conveyors and turbines). All of the surveyed 15 industries posted decreases from the previous months.
Production rose 2.9% on quarter in the April-June period after plunging 5.2% in January-March when suspended vehicle output and shipments over a safety test scandal caused a widespread slump beyond the auto industry and also hurt consumption.
From a year earlier, factory output slipped back 7.3% after rising a solid 1.1% (revised up from a 0.3% rise) in May for the first increase in seven months and slumping 1.8% in April. It was slightly smaller than the consensus forecast of a 7.6% fall.
The METI’s survey of producers indicated that output is expected to rise 4.0% in July after adjustment for its upward bias, led by a rebound in production machinery and electronic parts/devices, before rising a further 0.7% in August on higher output of electric and information communications equipment which may include lithium-ion rechargeable batteries.
The seasonally adjusted index of industrial production (100 = 2020) stood at 100.6 in June, down from a five-month high of a revised 10.4.4 in May. It is above the recent bottom of 87.6 reached in May 2020 but below 108.8 in January 2020, when the pandemic hadn’t had a widespread impact yet. The index briefly jumped to 108.8 in April 2021, 109.0 in June 2021 and 107.8 in August 2022.
Shipments of capital goods excluding transport equipment — a key indicator of business investment in equipment in GDP data — rose 0.5% on quarter in April-June after slipping 2.0% in January-March, rising 0.9% in October-December and falling 3.2% in July-September 2023.
This indicates a rebound in business investment in equipment, which fell 0.4% on quarter in January-March in payback for a sharp 2.0% rebound in October-December. Capex made a negative 0.1-point contribution to the first quarter GDP after providing a positive 0.3-point contribution the previous quarter.
Japan’s economy is expected to show modest growth of about 2% annualized in the second quarter, recovering only partially from a 2.9% slump (a 0.7% drop on quarter) in the first quarter, which was revised down sharply this month due to large-scale revisions to recent construction investment data. The 0.7% drop on quarter was caused by both weak domestic demand (downward revision to public works spending) and a pullback in net exports, each trimming total output by 0.4 percentage point. The economy narrowly averted a second straight contraction in the final quarter of 2023, showing zero growth on quarter, or an annualized 0.1% increase.