–Japan’s METI Keeps View: Factory Output Picking Up
–METI Warns of Drag from Chip Shortages, Coronavirus Variants
–Apr-June Capital Goods Shipments Gain Indicates Solid Capex in Q2 GDP
By Max Sato
(MaceNews) – Japan’s industrial production rebounded in June after taking a breather the previous month, staying on a pickup trend amid uncertainty over global growth caused by the pandemic, preliminary data released Friday 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 lingering semiconductor shortages and the spread of more contagious coronavirus Delta variants.
Earlier this month, Japan’s government maintained its assessment that the domestic economy is headed for recovery, backed by solid exports and production, while noting that consumer spending on services remains sluggish because of restrictions on economic activity aimed at slowing the spread of the pandemic.
The Bank of Japan’s real export index rebounded a seasonally adjusted 0.5% on month in June, the first rise in two months (-0.2% in May, +2.5% in April). In April-June, the index gained 3.5% on quarter, the fourth consecutive rise after +1.8% in January-March.
Exports jumped 48.6% in June from a year earlier for the fourth y/y rise in a row, recovering from the pandemic-caused slump of 2020, according to the Ministry of Finance. The pace of increase decelerated slightly from a 49.6% surge in May.
The key points from the data:
* Industrial production rose a seasonally adjusted 6.2% from the previous month in June, coming in stronger than the median economist forecast of a 5.0% rise. It was the first m/m rise in two months after a 6.5% fall (revised down from -5.9%).
* In the April-June quarter, output rose 1.0% for the fourth quarter-on-quarter increase but the pace of increase continued decelerating from +2.9% in January-March and +5.7% in October-December.
* The increase in June was led by higher production of passenger cars, machines to produce semiconductors and flat-panel displays, as well as electronic parts and devices.
* 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 99.3 in June. It was well above the recent bottom of 77.2 hit in May 2020 and exceeded 99.1 seen in January 2020, when the pandemic hadn’t had a widespread impact yet.
* From a year earlier, IIP jumped 22.6% in June after rising surging 21.1% (revised down from 22.0%) in May, posting the fourth consecutive y/y gain in reaction to the pandemic-depressed activity in the second quarter of 2020.
* Based on its survey of manufacturers, METI projected that industrial production would slip 1.1% on month in July (revised up from -1.4% forecast last month) and rise 1.7% in August. Adjusting the upward bias in output plans, METI forecast production would fall 2.2% in July.
* “Despite lingering effects of global semiconductor shortages, which led to a sharp decline in production in May, production in June is believed to have increased due to demand for automobile and others,” METI said.
* METI maintained its recent assessment, saying, “Production is picking up.” Despite fluctuations, industrial production “remains on a recovery track,” it said.
* In June, shipments rose 4.3% on month, the first rise in two months after falling 5.5% the previous month, while inventories marked the first rise in three months, up 2.3% after slipping 1.1% in May. The inventory index was at 95.9 (100 in 2015), one of the lowest levels under the current statistical formula dating to January 2012. A sharp rebound in auto output led to higher shipments but some of the increase went to inventories, the METI said.
* Shipments of capital goods excluding transport equipment — a key indicator of domestic demand in GDP data — rose 5.6% on month in June for the first rise in two months after -5.5% in May. In April-June, those shipments gained 7.5% on quarter after +5.5% in January-March.
* Economists on average forecast the domestic economy to rebound just 0.19% at an annualized rate in April-June, after slumping 3.9% in January-March, according to the latest monthly ESP Survey of 37 forecasters conducted by the Japan Center for Economic Research from June 28 to July 5.