By Max Sato
(MaceNews) – Japan’s industrial production slipped for the second straight month in December as the auto industry, which had led the recent pickup in overall output, took a breather amid the pandemic, while production of turbines and laptops lost some steam after recent gains, preliminary data released Friday by the Ministry of Economy, Trade and Industry showed.
The ministry maintained its view that factory output is still picking up despite surging new coronavirus cases in many parts of the world, pointing to higher production in January projected by some manufacturers. It also repeated its warning about downside risks to domestic and global economic activity posed by the pandemic.
The key points from the data:
* Industrial production fell 1.6% from the previous month in December, as largely expected (the consensus economist forecast was -1.5%). It was the second straight month-on-month drop after a 0.5% fall in November, which was revised down from being unchanged. The decrease was led by lower production of general machinery (turbines, boilers), vehicles (passenger cars, car parts) and electrical machinery/information equipment (laptops, car navigation systems).
* Production fell m/m between February and May last year, with a steep 9.8% decline in April, and rose between June and October, with an 8.7% jump in July.
* The level of the Index of Industrial Production (100 in the 2015 base year) slipped to 93.2 in December, which was much higher than the recent bottom of 78.7 in May but it was still below 99.8 seen in January 2020. “The level of production is still low, and so we hope to see it recover further,” the ministry said in a statement, repeating its view from the previous month.
* From a year earlier, IIP dipped 3.2% in December for the 15th straight year-on-year drop, with the pace of decrease decelerating from -3.9% in November. The decline was smaller than -9.0% in September and -13.8% in August.
* Based on its survey of manufacturers, METI projected that industrial production would jump 8.9% on month in January (revised up from +7.1% forecast last month) and slip 0.3% in February. Adjusting the upward bias in output plans, METI forecast production would rise at a slower pace of 4.4% on month in January.
* METI maintained its assessment, saying, “Production is picking up.” The ministry urged a close watch on “downside risks to domestic and overseas economic growth posed by the recent spread of infections.”
* In December, shipments fell 1.6% on month, the second consecutive m/m drop after slipping 1.2% in November, while inventories posted the first rise in nine months, up 1.1% vs. -1.5% the previous month, indicating a pause in the recent pickup in production.
* Industrial production posted the second straight quarter-on-quarter gain in October-December, up 6.2%, after rising 8.7% in July-September, leading to the ministry’s view that the momentum for recovery has not been lost yet.
* For the whole of 2020, factory output slumped 10.1% from the previous year in the wake of the global pandemic, marking the second straight annual decline after falling 3.0% in 2019.
Government keeping pickup outlook
Last week, Japan’s government stuck to its recent assessment that the domestic economy is showing signs of a pickup from the pandemic-caused slump, pointing to a mixed bag of data – more cautious consumer spending against brighter spots in business investment and housing construction, according to its monthly report released on Jan. 22 by the Cabinet Office.
The government continued to see a gradual pickup in global demand, upgrading its views on China and Taiwan for the first time in three months while noting that weakness lingered in Germany and Britain.
The government maintained its cautiously optimistic view that both the domestic and global economies are “showing signs of a pickup,” a statement unchanged since last July when it revised up its overview.
Among other brighter spots, the government revised up its assessment on business investment in equipment for the first time in 28 months.
Carmakers and manufacturers of production machinery are increasing or upgrading their capacity, it said, adding that telecom carriers as well as wholesalers and retailers are changing their systems and networks more in tune with the fifth-generation technology standard and e-commerce transactions.
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Contact this reporter: max@macenews.com.
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