JP: Industrial Production

November 29, 2016 05:50 CST

Consensus Actual Previous Revised
Month over Month -0.1% 0.1% 0.0% 0.6%
Year over Year -1.3% 0.9% 1.5%

Preliminary data for October showed that Japan's industrial production index rose 0.1 percent on the month (seasonally adjusted), compared with a month-on-month increase of 0.6 percent in September. The consensus forecast for October was a fall of 0.1 percent. Last month, officials had forecast output would increase by 1.1 percent month-on-month in October.

In year-on-year terms (using original data), the index fell 1.3 percent in October, down from the increase of 1.5 percent in September. Industrial production has increased in year-on-year terms in only three of the last twelve months, highlighting the weak conditions in Japan's manufacturing sector. Recent PMI surveys, however, have shown some signs of improvement in the sector, and officials have cited today's industrial production data as evidence that output is growing at a "moderate pace".

The headline growth in October reflects stronger output in transport equipment, iron and steel, and electronic parts and devices, offsetting weaker output in electrical machinery, non-ferrous metals and textiles.

Officials forecast output to increase on a month-on-month basis by 4.5 percent in November and to fall by 0.6 percent in December.

Industrial Production measures the physical output of the nation's factories, mines and utilities. Factories manufacture various products, and the industrial production indexes have been prepared as a comprehensive indicator of wide-ranging production activities for such products and are regarded as some of the most important among economic indexes.

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.