–METI Upgrades View After Downgrades: Output Making One Step Forward, One Step Back
–METI: To Watch Effects of Rising Covid Cases, Parts Shortages, Inflation
By Max Sato
(MaceNews) – Japan’s industrial production rebounded more strongly than expected in June as China ended its Covid lockdown of Shanghai but parts shortages and logistical bottlenecks continued to prevent a fast recovery from the pandemic, preliminary data released Friday by the Ministry of Economy, Trade and Industry showed.
The METI’s survey of producers indicate that output will lose some steam in July but pick up in August as supply constraints are showing signs of easing and demand for consumer electronics remains strong.
The key points from the data:
* The increase in June was seen in 11 of the 15 industries, led by higher output of vehicles (passenger cars, trucks, engines), electrical machines and communications equipment (telecom base equipment, lighting for autos and medical measuring equipment) and electronic parts and devices (reflecting solid demand for semiconductors and screens for tablets).
* Production fell 2.8% on quarter in the April-June period, posting the first quarterly drop after rising 0.8% in January-March, edging up 0.2% in October-December and dipping 1.9% in July-September and rising 0.2% in April-June 2021.
* Shipments of capital goods excluding transport equipment – a key indicator of domestic demand in GDP data – rose 0.9% in the second quarter, marking the first quarter-on-quarter rise in four quarters after being flat in the first quarter, falling 1.5% in the final quarter of 2021, slipping 0.7% in July-September and rising 6.7% in April-June last year.
* Based on its survey of manufacturers, METI projected that industrial production would rise 3.8% on the month in July (revised up from a 2.5% rise forecast last month) and gain 6.0% in August. Adjusting the upward bias in output plans, METI forecast production would fall 0.9% in July. The two-month lockdown in Shanghai was lifted at the end of May, but China’s strict zero-Covid public health policy continues amid a resurgence in new Covid cases, leaving the outlook uncertain.
* The index of industrial production (100 in the 2015 base year) rose to 95.8 in June. It was above the recent bottom of 77.2 hit in May 2020 but well below 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 fell 3.1% in June, marking the fourth straight drop after decreases of a revised 3.1% in May, 4.9% in April and 1.7% in March and a 0.5% rise in February. It was firmer than the median economist forecast of a 7.5% drop. 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 also posted the first rise in three months, up 4.6% on the month in June, after falling a revised 4.1% in May, dipping 0.3% in April and rising 0.6% in March. The rebound reflects higher output in the auto and electrics industries following the lifting of the Shanghai lockdown.
* Inventories marked the first rise in four months in June on higher auto output, up 2.1%, after decreases of 0.9% in May, 2.3% in April and 0.4% in March and a rise of 2.1% in February.