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JP: Industrial Production
| Consensus | Consensus Range | Actual | Previous | Revised | |
| Month over Month | -1.0% | -2.2% to 0.4% | 0.8% | -0.5% | -0.4% |
| Year over Year | 0.6% | -0.5% to 2.3% | 2.3% | 2.3% | 2.4% |
Highlights
Japan's industrial production unexpectedly posted its first rise in three months in April, up a modest 0.8% on the month, after slipping a revised 0.4% in March. But the latest report was not so strong: Seven industries showed gains while eight marked declines. The effective blockade of the Strait of Hormuz by Washington and Tehran continued to dampen factory output by squeezing the availability of naphtha, the crucial raw material for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
The monthly survey by the Ministry of Economy, Trade and Industry indicated that output would rise 2.1% on the month in May, led by demand for production machinery, vehicles and computer chips, before slipping 0.4% in June when a pullback is expected for those categories that are seen pushing up May production.
The ministry maintained its assessment that industrial output was"taking one step forward and one step back." The last change was made in the July 2024 report, when it upgraded its view.
Details:
Japan Apr industrial output +0.8% m/m (Mar revised to -0.4% from -0.5%); 1st rise in 3 months; median forecast -1.0% (range: -2.2% to -1.1%)
Japan Apr industrial output +2.3% y/y (Mar revised to +2.4% from +2.3%), 5th straight rise; median forecast +0.6% (range: -0.5% to +2.3%)
Japan METI keeps view: industrial output taking one step forward and one step back
Japan METI forecast index: May industrial output +2.1% m/m (adjusted for upward bias), June -0.4%
Japan METI: Apr industrial output m/m rise led by conveyors/cranes, computer chip testers, partly offset by falls in passenger cars, chemicals
Japan Apr industrial output: 7 out of 15 industries post rise, 8 are down
Market Consensus Before Announcement
Japan’s industrial production is likely to fall for a third straight month in April as war in the Middle East increasingly prompts shortages of raw materials, including oil- and chemical-related products. The situation may be restraining output in downstream industries such as transport equipment and business-oriented machinery.
In addition, the effective blockade of the Strait of Hormuz are stretching supplies of naphtha cracked from light (low-sulfur) crude oil, a source of ethylene, propylene and benzene, among other petrochemicals. These materials are essential for producing plastics and resins used in a wide range of consumer and industrial goods, from vehicles and appliances to paints and food packaging.
For instance, due to raw material shortages and naphtha supply disruptions caused by tensions in the Middle East, major Japanese snack maker Calbee Inc. is shifting many of its flagship products to simplified black-and-white packaging. The temporary design change is intended to ensure steady product supplies while conserving petroleum-derived printing ink. These kinds of moves are gradually spreading across many industries.
Industrial production in April is expected to fall 1.0 percent on the month, following a revised 0.4 percent decline in March.
Meanwhile, output is expected to rise for a fifth straight month on the year in April, up 0.6 percent after a revised 2.3 percent gain in March from the initial 2.4 percent increase.
In the previous survey released in late April, the Ministry of Economy, Trade and Industry (METI) maintained its assessment that industrial output was “taking one step forward and one step back.” The last revision to the assessment came in the July 2024 report, when the ministry upgraded its view.
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.