| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Month over Month | 3.3% | 0.5% to 4.0% | 0.5% | -0.9% | -1.1% |
| Year over Year | 1.1% | -1.8% to 4.2% | -1.8% | 0.7% | 0.5% |
Highlights
Key points:
-- Japan's industrial production +0.5% on the month in May, posting the first rise in two months vs. -1.1% in April and +0.2% in March, but coming in much weaker than the median economist call of +3.3% and the official projection of +5.2% released last month.
--The slight increase was led by a rebound in the auto industry (passenger cards, engines) and production equipment (excavators, equipment for making flat screen panels) as well as a higher output of general machinery (compressors, bearings).
--METI: Nine out of the 15 industries recorded gains, five showed drops and one was flat.
--METI's survey of producers indicated that output would slump 1.9% in June, led by a pullback in transport equipment (possibly hit by the Trump tariffs on autos) and general machinery, before sliding a further 0.7% in July due to declines in transport equipment and electric/information telecommunications equipment (this category includes laptop computers, semiconductor detectors).
--Output -1.8% on the year, also much weaker than the median forecast (+1.1%) and at the low end of the economist forecast range (-1.8% to +4.2%).
--METI maintains its assessment, saying industrial output is"taking one step forward and one step back."
Takeaway:There is some optimism in the financial markets that the global trade war may be resolved through negotiations but the protectionist U.S. trade policy remains unpredictable as seen in President Trump's abrupt cancellation of bilateral trade talks with Canada, a close ally, and geopolitical risks have been heightened. Japanese automakers have lowered prices for their U.S. customers to cover higher import costs but exporters have been sluggish, weighing downward pressure on industrial production.
-- Japan's industrial production +0.5% on the month in May, posting the first rise in two months vs. -1.1% in April and +0.2% in March, but coming in much weaker than the median economist call of +3.3% and the official projection of +5.2% released last month.
--The slight increase was led by a rebound in the auto industry (passenger cards, engines) and production equipment (excavators, equipment for making flat screen panels) as well as a higher output of general machinery (compressors, bearings).
--METI: Nine out of the 15 industries recorded gains, five showed drops and one was flat.
--METI's survey of producers indicated that output would slump 1.9% in June, led by a pullback in transport equipment (possibly hit by the Trump tariffs on autos) and general machinery, before sliding a further 0.7% in July due to declines in transport equipment and electric/information telecommunications equipment (this category includes laptop computers, semiconductor detectors).
--Output -1.8% on the year, also much weaker than the median forecast (+1.1%) and at the low end of the economist forecast range (-1.8% to +4.2%).
--METI maintains its assessment, saying industrial output is"taking one step forward and one step back."
Takeaway:There is some optimism in the financial markets that the global trade war may be resolved through negotiations but the protectionist U.S. trade policy remains unpredictable as seen in President Trump's abrupt cancellation of bilateral trade talks with Canada, a close ally, and geopolitical risks have been heightened. Japanese automakers have lowered prices for their U.S. customers to cover higher import costs but exporters have been sluggish, weighing downward pressure on industrial production.
Market Consensus Before Announcement
Key forecast points:
--Japan’s industrial production is seen rebounding 3.3% on the month May (vs. METI’s projection +5.2%) after posting its first drop in three months in April (-1.1%) amid some optimism that the global trade war may be resolved through negotiations, although the protectionist U.S. trade policy remains unpredictable and geopolitical risks have been heightened. Output is seen up 1.1% y/y vs. +0.5% in April for a fourth straight gain.
--The Ministry of Economy, Trade and Industry is expected to maintain its assessment (the last change was an upgrade in July 2024), saying industrial output is"taking one step forward and one step back.”
--Japan’s industrial production is seen rebounding 3.3% on the month May (vs. METI’s projection +5.2%) after posting its first drop in three months in April (-1.1%) amid some optimism that the global trade war may be resolved through negotiations, although the protectionist U.S. trade policy remains unpredictable and geopolitical risks have been heightened. Output is seen up 1.1% y/y vs. +0.5% in April for a fourth straight gain.
--The Ministry of Economy, Trade and Industry is expected to maintain its assessment (the last change was an upgrade in July 2024), saying industrial output is"taking one step forward and one step back.”
Definition
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.
Description
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.
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.
