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Economy in Brief

Japan IP Is In A Strong Quarterly Recovery 
by Robert Brusca July 13, 2009

Japan’s consumer confidence is at a year and one half high. The government has upgraded its economic assessment for the third month in a row. Industrial output is on a tear. IP is up for three months in a row. The past two month’s gains were on monthly increases of better than 5.5% each. With the Yr/Yr month growth rate at -27.6%, over three months Japan’s IP is up at an annualized pace of 67.8%.

Textiles, mining and investment goods are major groups with declines over three months. It is interesting and telling that for Japan investment goods output has lagged so badly. Despite high unemployment virtually everywhere Japan’s consumer goods output is up and investment goods output has been decaying. This month for the first time in eight months investment goods output has rising on the month. The business sector has been very hard hit by recession around the globe. Although consumers have been hurt by unemployment and fears of unemployment, consumer most consumers still hold their jobs. Some of the displaced workers fallback on government programs and then there is stimulus spending to try and prime the various economic pumps.

Maybe this month’s output increase of investment goods signals that the forces of growth are finally going to include the business sector and that investment projects have been cut back and postponed all that is possible. But one observation is too thin a reed to seize. For now we can only watch the output reports and look to the corporate earnings reports that will probably remain downbeat. Whenever stirring in the industrial sector is in progress in this cycle it seems to be mild and small compared to past declines. Germany is showing some stirring in its international business orders. Japan now has one-month rise in investment goods output. We think the business sector will mark time for a while longer and that the spread of the end-recession and eventually of the recovery to investment goods is still a work in progress that is lagging behind the consumer recovery.


Japan Industrial Production Trends
  m/m % Saar % Yr/Yr Qtr-2-Date
Seasonally adjusted May-09 Apr-09 Mar-09 3-mo 6-mo 12-mo Yr-Ago % AR
Mining&MFG 5.7% 5.9% 1.6% 67.8% -27.8% -27.6% 2.3% 35.2%
Total Industry 5.8% 5.4% 1.3% 63.1% -27.0% -26.8% 2.2% 31.7%
MFG 5.5% 5.9% 1.7% 66.9% -28.0% -27.7% 2.2% 35.5%
  Textiles -1.5% 3.2% -5.7% -15.3% -29.1% -22.0% -7.2% -15.5%
  T-port 28.3% 7.3% 3.9% 317.9% -43.8% -42.3% 7.6% 80.8%
Product Group
  Consumer Goods 6.3% 8.6% 1.4% 88.1% -17.2% -17.3% 3.4% 52.2%
  Intermediate Goods 7.6% 9.5% 3.4% 120.4% -27.6% -29.7% 4.5% 75.3%
  Investment Goods 2.2% -5.6% -2.2% -20.6% -45.3% -35.2% -3.3% -37.3%
Mining -3.5% 1.0% -4.0% -23.4% -22.2% -12.3% -3.6% -19.2%
Electric&Gas 2.2% -0.3% -0.7% 4.6% -13.1% -7.7% 1.6% -3.7%
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