Japan June Industrial Production Rebounds, Paced by Auto Sector amid Solid Sales in Domestic, Overseas Markets

–Output Up 1.3% Q/Q in April-June after 1.8% Drop in January-March

–METI Survey: Output Likely to Slip Back in July, Post Modest Rise in August  

–METI Keeps View: Output Showing Gradual Pickup

–METI Repeats: To Watch Effects of Parts Shortages, Inflation

By Max Sato

(MaceNews) – Japan’s industrial production rebounded on the month in June after posting its first drop in four months in May, led by automobiles amid improving supply chains as well as electronic parts and general machinery, preliminary data released Monday by the Ministry of Economy, Trade and Industry showed.

From a year earlier, factory output marked a slight decline for an eighth decrease in the past 12 months. 

The METI’s survey of producers indicated that output is expected to give up all of June’s gain in July before posting a modest gain in August. 

The ministry maintained its assessment after upgrading it in April for the March data, saying industrial output “is showing signs of a gradual pickup.” The METI repeated that it will keep a close watch on the effects of parts and materials supply shortages and rising prices.

The key points from the data:

* Industrial production rebounded a seasonally adjusted 2.0% on the month in June, coming in slightly weaker than the median economist forecast of a 2.4% rise (forecasts ranged from 1.8% to 3.5% gains). It followed a 2.2% drop (revised down from a 1.6% fall) in May, a 0.7% rise in April, a 0.3% gain in March, a 3.7% rebound in February and a 3.9% dip in January.

* Of the 15 industries, 10 posted increases from the previous month, led by the auto sector, and five recorded decreases. Demand for transmission and steering parts came from the recovering domestic auto industry while solid production of trucks rose in line with solid sales in both domestic and overseas markets. 

* Production rose a seasonally adjusted 1.3% on quarter in the April-June period after falling 1.8% in January-March and slipping 1.7% in October-December and rebounding 3.1% in July-September last year.

* Based on its survey of manufacturers, METI projected that industrial production would dip 0.2% on the month in July (revised up from a 0.6% drop forecast last month) and rise 1.1% in August. Adjusting the upward bias in output plans, however, METI forecast production would slip 2.7% in July.

* Shipments of capital goods excluding transport equipment – a key indicator of business investment in equipment in GDP data – rebounded 3.7% on quarter in April-June after slumping 6.5% in January-March, falling 5.1% in October-December after rising 8.1% in July-September. Capital investment is expected to post a second straight quarterly gain to support solid economic growth in the second quarter in the preliminary Q2 GDP data due on August 15. 

* From a year earlier, the production index edged down 0.4% in June for an eighth drop in the past 12 months after rising 4.2% (revised down from 4.7%) in May, which was the first increase in seven months. It was weaker than the median economist forecast of a 0.3% rise (forecasts ranged from being unchanged to a 1.3% rise).

* The index of industrial production (100 = 2020) stood at 105.3 in June, up from 103.2 in May. It is well above the recent bottom of 87.6 hit in May 2020 but below 108.8 seen 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.