Japan: First industrial production decline in six months since July 2016 - Nomura

Analysts at Nomura note that Japanese industrial production fell 0.8% m-m in January 2017, marking the first such decline since July 2016.

Key Quotes

“The sectors that contributed to the overall decline in January were transportation equipment (-4.7% m-m), chemicals (ex pharmaceuticals; -3.5%), and general-purpose, production, & business oriented machinery (-1.7%). In contrast, the driver of output recovery since last year, electronic parts & devices, saw growth of 5.7% m-m.” 

“We identify the most important point from the latest data as being the clear bearishness in production plans for March. METI’s Survey of Production Forecasts in Manufacturing projects an output decline of 5.0% m-m in March following growth of 3.5% in February. Even when adjusting for the past realization and revision ratios for production plans we estimate this represents +1.6% m-m for February and -4.9% for March, with a substantial output decline still projected in March. Supposing that output turns out to match the forecast figures, Jan-Mar industrial production would rise 0.8% q-q (-0.4% when adjusting for the revision ratio over the past three months).” 

“Within the overall production forecast, all sectors project output growth during February, but all except information & communication electronics equipment then expect output will fall in March. When looking at Feb-Mar combined, output growth is forecast by the information & communication electronics equipment, transportation equipment, chemicals, and electronic parts & devices sectors, while the sectors expecting a decline include general-purpose, production, & business oriented machinery, and electrical machinery (unadjusted data).”