Japan: Industrial production declines for a fifth month in a row
November 30, 2010
The Japanese economy is showing signs of weakness. In October, industrial production fell for the fifth consecutive month, declining a seasonally adjusted 1.8% over the previous month, which came in below the 1.6% contraction tallied in September (previously reported: -1.9% month-on-month). Nonetheless, the reading beat market expectations, which had industrial production decreasing 3.2%. The monthly contraction was mostly driven by a significant fall in the production of transportation equipment (-13.6% mom), in particular of passenger cars, reflecting the end of the government's subsidy for eco-friendly vehicles, which had boosted car sales since April last year. Moreover, lower production of information and communications electronic equipment also contributed to the monthly decline. Owing to the monthly fall, industrial production growth decelerated in annual terms from an 11.5% increase in September to a 4.1% expansion in October. Yet, annual average growth continued to improve, up from 13.1% in September to 15.3% in October, reflecting mostly the dismal performance of the industrial sector in the previous year (September 2009: -14.4% year-on-year). According to a survey published together with industrial output data, manufacturers expect industrial output to continue to fall, contracting 1.4% in November and 1.5% in December. Despite the projected decline in the final months of the year, the Consensus Forecast panel sees industrial production growing 15.8% over the full year. Next year, the panel expects industrial output growth to moderate sharply to 0.3%.