JP: Industrial Production

Wed Aug 30 18:50:00 CDT 2017

Consensus Actual Previous Revised
Month over Month -0.4% -0.8% 1.6% 2.2%
Year over Year 4.7% 4.9% 5.5%

Preliminary data for July showed that Japan's industrial production index fell 0.8 percent on the month (seasonally adjusted) after an increase of 2.2 percent in June, weaker than the consensus forecast of a decline of 0.4 percent. Last month, officials had forecast output would increase by 0.8 percent month-on-month in July. In year-on-year terms, the original industrial production index increased 4.7 percent in July, slowing from 5.5 percent in June.

The month-on-month decline in headline production in July reflected stronger output of general-purpose, production and business-oriented machinery, electrical machinery, and chemicals. This was offset by weaker output of electronic parts and devices, ceramics and related products, and petroleum and coal products.

The decline in the industrial production index in July is broadly in line with PMI survey data which also showed that conditions in the manufacturing sector weakened that month. Preliminary PMI survey data released last week, however, indicate that growth in the sector strengthened in August, with final data scheduled for release later in the week. Today's report shows that officials also expect industrial output to increase 6.0 percent on the month in August and then decline 3.1 percent in September.

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.