— METI Keeps View After Recent Downgrade: Factory Output Pausing
— METI Repeats: Watch Effects of Rising COVID Cases, Global Chip Shortages
By Max Sato
(MaceNews) – Japan’s industrial production posted a modest rebound in October amid easing disruptions of parts supply from Southeast Asia, which has forced automakers and other firms to reduce factory operations since August, but the first rise in four months was too small to recover recent sharp drops, preliminary data released Tuesday by the Ministry of Economy, Trade and Industry showed.
The ministry maintained its assessment that factory output is “pausing” after downgrading it two months ago from its previous assessment that it was “picking up.” It also repeated its warning about downside risks to domestic and global economic growth posed by the spread of more contagious coronavirus variants and semiconductor shortages.
The key points from the data:
- Industrial production rebounded a seasonally adjusted 1.1% from the previous month in October, coming in weaker than the median economist forecast of a 1.7% rise. It was the first increase in four months after a 5.4% slump in September.
- The increase was led by higher production of passenger cars, semiconductor-making equipment (reflecting demand for capital investment in other countries), molds for cars and compressors.
- Production fell on the month 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) stood at 90.5 in October. It was above the recent bottom of 77.2 hit in May 2020 but below 99.1 seen in January 2020, when the pandemic hadn’t had a widespread impact yet.
- From a year earlier, the index fell 4.7% in October after dipping 2.3% in September, which was the first drop in seven months. The previous gains were in reaction to the pandemic-depressed activity in the summer of 2020.
- Based on its survey of manufacturers, METI projected that industrial production would jump 9.0% on month in November (revised up from a 5.7% rise forecast last month) and rise a further 2.1% in December. Adjusting the upward bias in output plans, METI forecast production would rise 4.2% in November.
- Shipments rose 2.0% on month in October, the first rise in four months after falling 6.1% the previous month. Easing supply chain disruptions helped lift shipments of automobiles, lithium-ion batteries and chip-making equipment.
- Inventories marked the second straight increase, up 0.8% on the month after rising 3.4% in September. Producers of synthetic rubber and plastics were hit by shipping network disruptions and also topped up inventories ahead of routine factory shutdowns for maintenance.
Japan’s Feeble Pickup Amid Slower Exports, Output
Japan’s government on Thursday maintained its economic overview but pointed to a mixed bag of data showing a pickup in consumption on eased Covid restrictions against flat exports and stalling recovery in factory output amid protracted supply bottlenecks, according to its monthly report released by the Cabinet Office.
The government said the economy “continues to show weakness in picking up,” although severe conditions caused by the pandemic are “gradually easing.”
It is more or less the same picture depicted last month: The economy “continues to show movements of picking up” despite severe conditions caused by the pandemic, although “its pace has weakened.” In September, the government downgraded its overview for the first time in four months by adding that the pickup is slowing.
The government downgraded its view on exports for the second straight month, saying they are “largely flat.” Previously, it said exports were “increasing at a slower pace.”
Japanese export volumes have recovered to pre-pandemic levels but shipments to Asia dipped 1.6% on the month in October, hit by slower recovery in China. Auto exports have also trended down in recent months due to semiconductor shortages and parts supply delays.
Based on September’s industrial output data, the government revised down its assessment on production for the first time in two months in the monthly report, saying its pickup is “pausing” as slower Chinese recovery has dented demand for production machinery from Asia. Previously, it said output was “picking up, although some weakness is seen,” a statement downgraded in August for the first time in 17 months.
Contact this reporter: max@macenews.com
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