–May’s Sharper-Than-Expected 5.9% Drop Also In Reaction To April Gain
— Japan’s METI Keeps Its View: Output Picking Up, Sees Rebound in June
–METI Warns of Drag From Global Chip Shortages, Coronavirus Delta Variant
By Max Sato
(MaceNews) – Japan’s industrial production slumped at a faster pace than expected in May from the previous month, after a strong gain in production machinery in April and lower output of automobiles due to global semiconductor shortages, preliminary data released Wednesday 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 the more contagious coronavirus Delta variant.
Official data have shown that Japanese exports took a breather in May after the recent pickup. The Bank of Japan’s real export index slipped a seasonally adjusted 0.2% on month in May after two months of solid gains (+2.5% in April and +3.2% in March).
Exports, however, posted the third straight month of a double-digit percentage surge from a year earlier in May, up 49.6%, largely in reaction to pandemic-triggered sharp declines from March to August last year, according to the Ministry of Finance.
The key points from the data:
* Industrial production fell a seasonally adjusted 5.9% from the previous month in May, coming in much weaker than the median economist forecast of a 2.4% fall. It was the first m/m drop in three months after a 2.9% increase (revised up from +2.5%).
* The decrease in May was led by lower production of passenger cars, auto parts, machines to produce semiconductors and flat-panel displays, vehicle lights and air conditioners.
* 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 6.0% rebound in July.
* The Index of Industrial Production (100 in the 2015 base year) was at 94.1 in May. It was well above the recent bottom of 77.2 hit in May 2020 but slipped back below 99.1 seen in January 2020, when the pandemic hadn’t had a widespread impact yet.
* From a year earlier, IIP jumped 22.0% in May after rising a revised 15.8% in April, posting the third consecutive y/y gain in payback for the pandemic-depressed activity in the second quarter of 2020.
* Based on its survey of manufacturers, METI projected that industrial production would rebound 9.1% on month in June (revised up from +5.0% forecast last month) and fall 1.4% in July. Adjusting the upward bias in output plans, METI forecast production would gain 5.4% in June.
* “Despite concerns about global semiconductor shortages, production is expected to continue picking up, backed by (demand for) production machinery and transportation equipment,” METI said.
* METI maintained its recent assessment, saying, “Production is picking up.” Despite fluctuations, industrial production “remains on a recovery track,” it said.
* In May, shipments fell 4.7% on month, the first m/m drop in three months after rising 3.1% the previous month, while inventories marked the second straight fall, down 1.7% after edging down 0.1% in April. The inventory index was at 93.1 (100 in 2015), the lowest level under the current statistical formula dating to January 2012.