JP: Industrial Production

Wed May 30 18:50:00 CDT 2018

Consensus Actual Previous
Month over Month 1.3% 0.3% 1.2%
Year over Year 2.5% 2.2%

Preliminary data for April showed that Japan's industrial production index advanced 0.3 percent on the month (seasonally adjusted), down from 2.2 percent in March and falling short of the consensus forecast for an increase of 1.3 percent. The increase in headline industrial production in April reflected increases in the output of transport equipment, general-purpose, production and business oriented machinery, and fabricated metals, offset by drops in the output of electronic parts and devices, electrical machinery and chemicals. In year-on-year terms, the original industrial production index increased 2.5 percent in April, up from 2.2 percent in March.

The smaller increase in April falls well short of the forecast officials made last month that output would increase by 3.1 percent month-on-month. The drop in month-on-month growth in industrial production in April also contrasts with PMI survey data which indicated that conditions in the manufacturing sector improved that month. Preliminary PMI survey data released earlier in the month, however, suggest that growth in the sector weakened in May, with final data scheduled for release later this week. Today's report shows that officials expect industrial output to increase by 0.3 percent in May before falling 0.8 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.