Industrial output bounces back in May

Latest reading: Industrial output—which makes up about 30% of Japan’s economy—fell 0.1% in month-on-month seasonally adjusted terms in May, the second consecutive decline after April's 1.1% decrease. The output of transport equipment excluding motor vehicles plunged by nearly a fifth, likely reflecting the impact of the recently introduced 10% U.S. baseline tariff and a 25% U.S. tariff on automobiles. On an annual basis, industrial output decreased 1.8% in May, contrasting April’s 0.5% expansion and marking the worst result since December. Accordingly, the trend pointed down, with the annual average variation of industrial production coming in at minus 1.4% in May, down from April's minus 1.2% reading.

Outlook: The print means industrial output per month in April–May fell 0.2% from Q1. In June, output is likely to shrink again, according to a survey of manufacturers that was released simultaneously with the May industrial output data. That bodes poorly for the economy in Q2, which our panelists see avoiding a second consecutive quarter of stagnation by only a hair’s breadth.

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