JP: Industrial Production

May 30, 2017 06:50 CDT

Consensus Actual Previous Revised
Month over Month 4.5% 4.0% -2.1% -1.9%
Year over Year 5.7% 3.3% 3.5%

Preliminary data for April showed that Japan's industrial production index rose 4.0 on the month (seasonally adjusted), compared with a decline of 1.9 percent in March and the consensus forecast for an increase of 4.5 percent. This is the biggest month-on-month gain in the index since June 2011. Last month, officials had forecast output would rebound with an increase by 8.9 percent month-on-month in April. In year-on-year terms, the original industrial production index rose by 5.7 percent in April, up from 3.5 percent in March.

The month-on-month increase in headline production in April reflected stronger output of transport equipment, general-purpose, production and business oriented machinery, and electronic parts and devices. This was offset by weaker output of information and communication electronics equipment, pulp, paper and paper products, and petroleum and coal products.

The advance in the industrial production index in April is consistent with PMI survey data which also showed that conditions in the manufacturing sector improved that month. Preliminary PMI survey data released last week, however, indicate that growth in the sector weakened somewhat in May. Today's report also shows that officials expect industrial output to contract 2.5 percent on the month in May before increasing by 1.8 percent in June.

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.