–Japan’s METI Keeps View: Factory Output Picking Up
–METI Repeats: Watch Effects of Rising COVID Cases, Global Chip Shortages
By Max Sato
(MaceNews) – Japan’s industrial production slipped in July from the previous month, as pandemic-caused lockdowns in Southeast Asia stifled global supply chain networks, but the pickup trend, led by export growth, appears to be intact, preliminary data released Tuesday by the Ministry of Economy, Trade and Industry showed.
The ministry maintained its view that factory output is “picking up” but also repeated its warning about downside risks to domestic and global economic growth posed by the spread of more contagious coronavirus Delta variants and lingering semiconductor shortages.
Last week, Japan’s government repeated that the economy is still headed for recovery after the Q2 GDP data showed unexpectedly resilient consumer spending and a rebound in business investment, but warned about the downside risk posed by a global spike in coronavirus cases.
The Bank of Japan’s real export index rose a seasonally adjusted 1.7% on month in July, the second straight m/m rise (+0.7% in June, -0.3% in May). In April-June, the index gained 3.5% on quarter, the fourth consecutive rise after +1.8% in January-March.
Exports jumped 37.0% in July from a year earlier for the fifth y/y rise in a row, with the pace of increase decelerating from +48.6% in June and +49.6% in May, according to the Ministry of Finance.
The key points from the data:
* Industrial production fell a seasonally adjusted 1.5% from the previous month in July, coming in firmer than the median economist forecast of a 2.5% drop. It was the first m/m drop in two months after a 6.5% rise (revised up from +6.2%) in June and a 6.5% fall in May.
* The decrease was led by lower production of passenger cars, lithium-ion batteries and chemicals while output of chip-making equipment, pulp and paper products and electronic parts and devices increased.
* “In addition to global semiconductor shortages, there was a shortage of materials supplied from Asia where economic activity was restricted amid rising new coronavirus, which led to lower production in the auto industry among others,” METI said in a statement.
* Production fell m/m between February and May last year, with steep declines of -10.3% in April and -10.5% in May during the first wave of the pandemic and rose between June and November, with a sharp 6.0% rebound in July.
* The Index of Industrial Production (100 in the 2015 base year) was at 98.1 in July. It was well above the recent bottom of 77.2 hit in May 2020 but slipped below 99.1 seen in January 2020, when the pandemic hadn’t had a widespread impact yet.
* From a year earlier, the index rose 11.6% in July after surging 23.0% (revised up from 22.6%) in June, posting the fifth consecutive y/y gain in reaction to the pandemic-depressed activity last summer.
* Based on its survey of manufacturers, METI projected that industrial production would rise 3.4% on month in August (revised up from +1.7% forecast last month) and gain 1.0% in September. Adjusting the upward bias in output plans, METI forecast production would edge up just 0.1% in August.
* METI maintained its recent assessment, saying, “Production is picking up.” Despite fluctuations, industrial production “remains on a recovery track,” it said.
* In July, shipments dipped 0.6% on month, the first drop in two months after rising 4.8% the previous month, due to lower export demand for lithium-ion batteries and global chip shortages that hit air conditioner production.
* Inventories also marked the first fall in two months, down 0.6% after rising 2.3% in June, led by sharp drawdowns of cars and trucks.