Recent Updates

  • Japan: Monetary Base, Balance of Treasury Funds w Private Sector (Nov)
  • China: Oil Consumption (Oct)
  • Philippines: Producer Price Index (Nov)
  • Australia: Retail Trade (Oct), Retail Deposits and Investment Rates (Nov)
  • more updates...

Economy in Brief

Japan's Industrial Production Advances
by Robert Brusca  March 31, 2022

In February total industrial production in Japan rose by 0.4%, reversing several months of declines. In January industrial production fell by 0.7%; in December it fell by 0.8%. That contrasts to the month previous to that as output had been up very strongly in November.

Total industrial production has an uneven trend with a tilt toward the deceleration. At a 0.7% growth rate over 12 months that elevates to 1.7% over six months but then turns lower over three months as total industrial production declines at a 4.5% annual rate.

Similarly, for manufacturing output, an increase posts in February with declines in January and December. Over three months there's a decline at a 6% annual rate that follows an increase at a 3% annual rate over six months and compared to a gain of only 0.3% over 12 months. Manufacturing shows a tendency to decline. The sharp negative growth rate over three months gives the series its demeanor but trend is not monotonic and therefore not clearly determined.

Select industries
The two industries in the table, textiles and transportation, show uneven and inconsistent monthly patterns as well as divergent sequential patterns. Textiles do show a progression toward acceleration while transportation shows an inclination toward weakness mostly based on the steep minus 20% annual rate decline over three months.

Sector trends
By product group or sector, the trends once again are uneven: consumer goods and intermediate goods follow the trend of overall industry showing declines in December and January and a slight rebound in February. Investment goods show a decline in December, an increase in January and a small decline in February; these results translate, once again, into mostly uneven sequential trends. For consumer goods, there's a 1.8% rate decline over 12 months, a sharp 10% rebound over six months, then a 6.5% annual rate decline over three months. For intermediate goods, there's a 1.0% increase over 12 months, another 1.0% increase at an annual rate over six months and then a 4% annual rate decline over three months. Investment goods show a clear trend that is weakening as growth is at 1.2% over 12 months, declining to a -2.3% pace over six months then eroding further to a -4.9% rate over three months.

Mining shows sequential growth rates that are clearly deteriorating and logs a -9.6% annual rate decline over three months. Electric & gas utilities show the opposite trend, with a 16.3% surge in output over three months.

The quarter-to-date trends show for overall industrial production a rise at a 4.6% annual rate and in manufacturing a rise at a 4.2% annual rate. By sector, consumer goods are up at a 4.6% annual rate, intermediate goods at a 4.4% annual rate and investment goods by 3.0% at an annual rate. Mining, however, shows declines in double digits at a -12.7% pace. Electric & gas utilities show an increase at a 22.7% annual rate.

Since Covid...
The changes since January 2020, a reference point over two years ago, underline how weak conditions in industry have been in the intervening period. Total industry output is down 2% on balance over that timeline. Manufacturing output is down by 3.1%. Consumer goods output is down by 7%, intermediate goods output is down by 1.3% and investment goods output is down by 0.6%. Since January 2020, mining output is down by 7.5%; however, electric & gas utilities have output up by 7.8%.

Summing up
Japan did post an increase in output in February; however, the trends are not particularly encouraging even when we drill down to some of the industry and sector levels. Still, quarter-to-date data show that there's an increase in output underway in 2022-Q1 with two months data in hand. However, it's been a prolonged period of weakness over the last two years with industrial production generally weaker on balance than it was in January 2020. Japan continues to face challenges as does the global economy. Japan's main trading partner, China, continues to pursue a zero Covid policy that has weakened its economy and made it a poor export market. The war in Ukraine and ongoing supply issues are other problems that Japan must deal with the same as every other economy. As of February, Japan seems to still be facing a lot of headwinds.

large image