Japan: Industrial production contracts unexpectedly in June
July 30, 2012
In June, industrial production declined 0.1% over the previous month in seasonally adjusted terms, following the revised 3.4% drop observed in May (previously reported: -3.1% month-on-month). Moreover, the reading contrasted the 1.6% rise expected by the market and represented, in fact, the third consecutive monthly fall. On an annual basis, industrial production decreased 2.0% in June, which contrasted the 6.0% expansion observed in May and marked the lowest print since December 2011. According to the Ministry of Economy, Trade and Industry, the industries that mainly contributed to the monthly deterioration were transport equipment, electrical machinery as well as iron and steel. Owing to the monthly drop, the government downgraded its assessment on Japan's industrial production, stating that "output appears to be in a flat trend." Despite the negative June reading, according to the Survey of Production Forecast, manufacturers are becoming more upbeat and now see industrial output increasing 4.5% month-on-month in July, which represents an improvement compared to the 2.4% rise expected in the previous month's survey. However, manufacturers foresee a 0.6% drop in August. Given the weak growth rates seen in recent months, the trend is now pointing down, with annual average growth in industrial production slowing from 1.8% in May to 1.7% in June.