Japan’s industrial production shows solid increase, downside risks remain

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By Harumi Taguchi, Principal Economist, IHS Global Insight

Key Points: 

  • Japan’s IIP (index of industrial production) rose by 1.9% month-on-month (m/m) in June following a 2.6% drop in the previous month.
  • Majority of industry groupings showed increases, including chemical (excluding drugs), fabricated metals and ceramics, stone and clay, and transportation equipment, which is recovering from factory shutdowns following the Kumamoto Earthquake.


  • Strength in new housing starts and public construction saw rebounds in production and shipments for construction goods.
  • Inventory held at May level, reflecting progress in destocking and improvements in shipments for some industry groupings, including general-purpose, production & business oriented machinery.

Outlook:

A 3.2% rise in shipments for capital goods (excluding auto) following five consecutive quarters of decline suggests an increase in private capital expenditure in the second quarter. Industry expects continued solid recovery in production to rise 2.4% in July and 2.3% in August, which could be supported by some industry groupings which progressed in destocking.

That said, downside risks remain due to a rising yen and uncertainties over external demand, although the resumption of operation at auto factories and recovery works, as well as contraction activities supported by the stimulus plans, could underpin production.

 

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Source: The Insiderstories
Japan’s industrial production shows solid increase, downside risks remain

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