JP: Industrial Production

July 28, 2016 06:50 CDT

Consensus Actual Previous
Month over Month 0.7% 1.9% -2.3%
Year over Year -1.8% -1.8%

June industrial production rebounded 1.9 percent on the month after sinking 2.6 percent in May. Expectations were for an increase of 0.7 percent. On the year, industrial production was down 1.8 percent. That is worse than the 0.4 percent year-on-year contraction posted in May, but better than the 2.9 percent drop expected.

The main industries that contributed to the increase were iron & steel, transport equipment and electrical machinery. Offsetting those increases were declines in general-purpose, production & business oriented machinery, chemicals (excl. Drugs) and non-ferrous metals.

METI expects production to increase 2.4 percent in June and 2.3 percent in August.

Industrial production measures the physical output of the nation's factories, mines and utilities.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Industrial production provides key industry data for this export-dependent economy. The data are issued twice a month-a preliminary estimate at the end of the month for the preceding month and a revised estimate about two weeks later. All products, whether sold domestically or abroad, are included in the calculation of industrial production. Industrial production is highly sensitive to the business cycle and can often predict future changes in employment, earnings and income. For these reasons industrial production is considered a reliable leading indicator that conveys information about the overall health of the economy. This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.