International Finance

Japan’s December industrial output not per expectations

Revised data shows while production figures were still ahead of that in November, it fell short year-end predictions, reports Team IFM

Tokyo, February 19:  Japan’s industrial production in December didn’t increase at the pace it was initially estimated to have had, revised official data released on Monday showed, though it was still better than the substantial growth dip registered the month before.

Figures from the Ministry of Economy, Trade and Industry (METI) reflected a growth of 7.1 per cent in the month under review compared to December 2012. This was, however, slightly weaker by 0.2 per cent rise that the METI had forecast on January 30.

It was also lower than the month-on-month increase optimistically forecast earlier.

The earlier METI estimate had been based on new orders that had risen for the eleventh consecutive month in January, registering the sharpest pace since February 2006. The government had said the consequent spurt in production was 1.1 per cent in December 2013 over that of the previous month and an increase of 7.3 per cent over that of December 2013.

The actual performance was also contrary to what economic health tracker Markit had deduced based on its own separate survey – that Japan’s outlook for manufacturers had improved at the fastest pace in nearly eight years in December 2013.

Other analysts, coming to similar conclusions, traced the roots of the upsurge to a scheduled sales tax hike and the country’s senior citizens.

Claudia Tillbrooke, economist at economy tracker Markit, had concluded: “Maintaining the growth momentum seen in the final quarter of 2013, operating conditions at Japanese manufacturers improved at the sharpest rate in nearly eight years in January.”

Dampened Show

But quite clearly this was not to be. As against the 7.3 per cent industrial production growth that Japan had predicted in December over November 2013, actual growth was 7.1 per cent. On the brighter side, the result was ahead of the 4.8 per cent increase witnessed the month before.

Moreover, compared to the month before, seasonally adjusted factory output inched up 0.9 per cent, after having dropped 0.1 per cent in November. The flash estimates, however, spoke of a larger growth of 1.1 per cent at the end of 2013.

METI data also showed that keeping with production growth, however small, capacity utilisation in Japanese companies too climbed sequentially in December – by 2.2 per cent. This, incidentally, was quite an improvement from the 0.5 per cent shrinkage that had been earlier predicted.

In associated business activity, the data showed, shipments remained flat in November. This was slightly better than expectations, as earlier estimates were of a 0.1 per cent decline. The shrinkage in inventory was revised from 1.9 per cent to 1.8 per cent.

Similarly, inventory ratio dropped 1.2 per cent in December compared to initial forecast of 1.4 per cent fall.

In late January, economy tracker Markit had similarly spoken of bad days ahead for exporters despite the bright days being otherwise projected for manufacturers in the new year, saying the momentum was lost when it came to securing new overseas orders.

The data indicated that the recent growth momentum registered in new export orders was lost in January, as the pace of expansion eased to the weakest in the current five-month sequence of growth.

The PMI – the index for the health of a business sector – for new export orders fell to 52.8 in January from 55.7 in the previous month.

January Predictions

However, the future for the Japanese manufacturing sector looks rosy, the government said on January 30. According to it, new orders rose for the eleventh consecutive month in January, registering the sharpest pace since February 2006.

The consequent spurt in production, which was 1.1 per cent in December over that of the previous month, was also an increase of 7.3 per cent over that of the previous year.

And it gets better, METI indicated. According to the ministry’s Survey of Production Forecast in Manufacturing last month, production is expected to increase 6.1 per cent in January and increase 0.3 per cent the following month.

Markit had acknowledged this in a joint statement with the Japan Materials Management Association (JMMA). “Business conditions at Japanese manufacturers improved at the sharpest pace in nearly eight years in January,” it said. “Record highs in the growth of production and quantity of purchases reflected the sharp expansions seen in new orders over the past few months.”

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