Japan: Industrial production declines for the first time since the earthquake
October 28, 2011
Industrial activity declined for the first time in six months, in a sign that the economic recovery from the 11 March disaster is tapering off in the face of the global economic slowdown and a soaring yen. In September, industrial production contracted 4.0% over the previous month in seasonally adjusted terms, following the revised 0.6% increase observed in August (previously reported: +0.8% month-on-month). The September print dropped nearly twice as much as the market projection of a 2.1% decline. On an annual basis, industrial production fell 4.0% in September, after industrial output had expanded for the first time since the earthquake in the previous month (August: +0.4% year-on-year). The monthly decline was mainly driven by sharp losses in transport equipment and general machinery, as well as in electrical machinery. In particular, manufacturers pulled back strongly on cars, chip-related machines and cellphones. On the upside, the information and communication electronics category rebounded. As reported by the Survey of Production Forecast, manufacturers are less upbeat and see industrial output rising 2.3% in October, which is down from the 3.8% expansion expected in the previous month's survey. A 1.8% increase is expected in December. Meanwhile, the Bank of Japan's October Outlook for Economic Activity and Prices predicts GDP to grow between 0.2% and 0.4% in fiscal 2011 (July: between +0.2% and +0.6% year-on-year), while in fiscal 2012 the Central Bank sees the economy expanding at between 2.0% and 2.4% (July: between +2.5% and +3.0% yoy).