Japan August Industrial Output Rises in Many Sectors on Easing Supply Constraints

–METI Survey Points to Possible Output Dip in September, Solid Gain in October

–METI Upgrades View: Output Showing Signs of Moderate Rise Vs. Marking Time

–METI Repeats: To Watch Effects of a Rise in Covid Cases, Parts Shortages, Inflation

By Max Sato

(MaceNews) – Japan’s industrial production surged in August, well above forecasts, as easing global supply bottlenecks supported many industries including makers of semiconductor-producing equipment, steel mills and chemical firms, preliminary data released Friday by the Ministry of Economy, Trade and Industry showed.

But production of electronic parts and devices as well as automobiles declined from July amid lower demand for memory chips used in computers and smartphones and signs that monetary tightening by many central banks aimed at fighting inflation is slowing global economic growth.

The METI’s survey of producers indicate that output will probably dip in September but rebound in October. 

The ministry upgraded its view, saying industrial output is “showing signs of a moderate increase.” Previously, it said production was “making one step forward and one step back.” The METI repeated its recent statement that it will keep a close watch on the impact of a rise in Covid cases on domestic and global growth as well as parts and materials supply shortages and rising prices.

The key points from the data:

* Industrial production jumped a seasonally adjusted 2.7% on the month in August, coming in much stronger than the median economist forecast of a 0.2% fall (forecasts ranged from a 1.0% drop to a 2.0% rise). It followed a downwardly revised 0.8% rise in July, a 9.2% surge in June and a 7.5% plunge in May.

* Of the 15 industries, 10 posted increases and five recorded declines from the previous month.

* Based on its survey of manufacturers, METI projected that industrial production would rise 2.9% on the month in September (revised down from a 0.8% rise forecast last month) and climb a further 3.2% in October. Adjusting the upward bias in output plans, METI forecast production would fall 1.2% in September.

* The index of industrial production (100 in the 2015 base year) stood at 99.5 in August, well above the recent bottom of 77.2 hit in May 2020 and is now slightly above 99.1 seen in January 2020, when the pandemic hadn’t had a widespread impact yet.

* Production fell during the first wave of the pandemic in 2020. After a pickup later that year, more waves of infections caused logistical bottlenecks amid reopening demand and prompted parts supply delays from Southeast Asia, where lockdowns hit factory operations in August 2021. Later, easing supply bottlenecks pushed up production from October to December last year.

* From a year earlier, the production index rebounded 5.1% in August, marking the first rise in six months after decreases of a revised 2.0% in July, 2.8% in June, 3.1% in May and 4.9% in April. It was well above the median economist forecast of a 1.8% rise (forecasts ranged from increases of 1.3% to 4.6%).  Production showed double-digit percentage year-on-year gains from April to July 2021 in reaction to the pandemic-depressed activity the previous year.

* Shipments posted the third straight rise, up 1.9% on the month in July, after rising a revised 1.2% in July and 5.0% in June and falling 4.1% in May. It reflects higher output of passenger cars, motor cycles and trucks, thanks to easing supply bottlenecks, which also supported shipments of chip-making equipment and production machinery.

* Inventories rose 1.4% in August after rising 0.6% in July, rebounding 1.9% in June and falling 0.9% in May. Easing parts shortages and falling exports led to higher inventories of automobiles.