Japan: Industrial production declines unexpectedly in July
August 31, 2012
In July, industrial production declined 1.2% over the previous month in seasonally adjusted terms, contrasting the revised 0.4% rise observed in June (previously reported: -0.1% month-on-month). Moreover, the reading contrasted the 1.7% increase expected by the market and represented, in fact, the third drop in the last four months. On an annual basis, industrial production decreased 1.0% in July, which followed the 1.5% drop observed in June. According to the Ministry of Economy, Trade and Industry, the sectors that mainly contributed to the monthly deterioration were electronic part and devices, general machinery and precision instruments. As a result of the monthly drop, the government maintained its assessment on Japan's industrial production, stating that output appears to be in a flat trend. According to the Survey of Production Forecast, manufacturers are becoming more upbeat and now see industrial output increasing 0.1% month-on-month in August, which contrasts the 0.6% drop expected in the previous month's survey. However, manufacturers forecast a 3.3% drop in September. Despite the weak readings seen in recent months, the trend is now pointing upwards, with annual average growth in industrial production inching up from 1.7% in June to 1.8% in July.