By Max Sato
–METI: Producers See Capex Demand to Lead April Output
(MaceNews) – Japan’s industrial production unexpectedly rebounded in March as the impact of semiconductor shortages was limited and the drag from a quake-triggered supply chain constraint eased, preliminary data released Friday by the Ministry of Economy, Trade and Industry showed.
In the near-term, producers expect a continued rise in April, thanks to upbeat plans for business investment in equipment in Japan and other economies, according to METI.
The ministry maintained its view that factory output is “picking up,” backed by strong demand for equipment to produce semiconductors and flat-panel displays amid Chinese and U.S. economic recovery.
But METI also repeated its warning about downside risks to domestic and global economic activity in light of another wave of new coronavirus cases and due to concerns about global semiconductor shortages, which have prompted Japanese carmakers to trim output.
The chip shortage has been made worse by a fire that broke out on March 19 at a plant of Renesas Electronics, a key Japanese automotive semiconductor supplier. The company initially expected production to resume at the factory east of Tokyo in about a month, but later said it was likely to take three to four months before its production lines return to normal.
Last month the METI noted the supply of auto parts was also disrupted in the aftermath of a 7.3-magnitude earthquake that hit northeastern Japan on Feb. 13, which is believed to be one of many aftershocks of the March 2011 quake that caused massive tsunami and the worst nuclear meltdown since Chernobyl. This month the ministry said the impact of the supply chain constraint had eased.
Demand for semiconductor-producing equipment continued to be strong amid the global silicon cycle uptrend and a surge in demand for consumer electronics due to stay-home pandemic lifestyles.
The key points from the data:
- Industrial production rose a seasonally adjusted 2.2% from the previous month in March, coming in stronger than the median economist forecast of a 2.0% fall. It was the first m/m rise in two months after a 1.3% decrease (revised up from a preliminary 2.1% slip) and a 3.1% jump (revised down) in January.
- The unexpected increase in March was led by higher production of passenger cars, chemical products and plastics.
- In the January-March quarter, factory output rose a seasonally adjusted 3.0% for the third consecutive quarterly gain after rising 5.7% in the final quarter of 2020. For the pandemic-hit fiscal year that ended last month, output marked the second consecutive annual drop, down 9.5% from the previous year, when it had fallen 3.8%.
- 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 (revised down after annual changes to seasonal adjustments), and rose between June and November, with a 6.0% rebound in July (also revised down).
- The Index of Industrial Production (100 in the 2015 base year) was at 97.7 in March, which was well above the recent bottom of 77.2 (revised down) in May 2020, but it was still below the recent peak of 99.1 (revised down) in January 2020, when the pandemic hadn’t had a widespread impact yet.
- From a year earlier, IIP rose 4.0% in March, posting the first year-on-year rise in 18 months after falling 2.0% in February and showing double-digit percentage declines between April and August last year.
- Based on its survey of manufacturers, METI projected that industrial production would rise 8.4 on month in April (revised down from +9.0% forecast last month) and fall 4.3% in May. Adjusting the upward bias in output plans, METI forecast production would rise 4.6% in April.
- METI maintained its recent assessment, saying, “Production is picking up.” The ministry continued urging a close watch on the developments in new coronavirus infections and supply chain networks.
- In March, shipments rose 0.8% on month, the first gain in two months after falling 1.3% the previous month, while inventories marked the first rise in three months, up 0.1% after dipping 0.7% in February. The inventory index was at 94.5 (100 in 2015), the second lowest level during the current cycle. The lowest was 94.4 hit in February.
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Contact this reporter: max@macenews.com
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