Japan May Industrial Production Slips as Parts Shortages Hit Auto Industry Again After Recent Pickup; Output Rebounds on Year

–METI Survey: Output Likely to Post Solid Gain in June, Slight Dip in July 

–METI Keeps View After Upgrade for March Data: Output Showing Gradual Pickup

–METI Repeats: To Watch Effects of Parts Shortages, Inflation

By Max Sato

(MaceNews) – Japan’s industrial production posted its first drop in four months in May as automobile output was hit by parts shortages again after a recent recovery on better supply chains while slower global demand for equipment and chemicals also dented overall output, preliminary data released Friday by the Ministry of Economy, Trade and Industry showed.

From a year earlier, factory output marked its first rise seven months.

The METI’s survey of producers indicated that output is expected to mark a solid rebound on the month in June before falling back slightly in July.  

The ministry maintained its assessment after upgrading it April for the March data, saying industrial output “is showing signs of a gradual pickup.” Previously, it had said, production “has weakened.”

The METI repeated that it will keep a close watch on the effects of parts and materials supply shortages and rising prices. It has dropped its reference to the impact of a rise in Covid cases on domestic and global growth.

The key points from the data:

* Industrial production fell a seasonally adjusted 1.6% on the month in May, coming in weaker than the median economist forecast of a 1.0% fall (forecasts ranged from a 3.0% drop % to a 0.8% rise). It followed a 0.7% rise (revised up sharply from a 0.4% fall) in April, a 0.3% gain (revised down from a 1.1% rise) in March, a 3.7% rebound (revised down from a 4.6% jump) in February, a 3.9% dip (revised up from a 5.3% slump) in January and a 0.6% rise (revised up from a 0.3% increase) in December.

* Of the 15 industries, 12 posted decreases from the previous month, led by the auto sector, and three, including makers of production equipment, recorded increases.

* The METI changed the base year of the index of industrial production to 2020 from 2015, effective with revised April data, causing widespread revisions to recent figures.

* Based on its survey of manufacturers, METI projected that industrial production would rebound 5.6% on the month in June (revised up from a 1.2 rise forecast last month) and slip 0.6% in July. Adjusting the upward bias in output plans, however, METI forecast production would rise a solid 3.4% in June.

* From a year earlier, the production index rebounded 4.7% in May, marking the first increase in seven months after falling 0.7% (revised down from a 0.3% slip) in April. It was softer than the median economist forecast of a 5.0% rise (forecasts ranged from 3.3% to 11.1% gains).

* Under the new base year, the index (100 = 2020) stood at 103.8 in May, down from a five-month high of 105.5 in April. It is well above the recent bottom of 87.6 hit in May 2020 but below 108.8 seen in January 2020, when the pandemic hadn’t had a widespread impact yet. The index briefly jumped to 108.8 in April 2021, 109.0 in June 2021 and 107.8 in August 2022.

* 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 2021. Output has since fluctuated widely, ending fiscal 2022 to March 2023 with a slight 0.3% drop on the year following a 5.5% jump in fiscal 2021 and a 9.5% slump in fiscal 2020 (fiscal year figures have been revised slightly under the new base year).