• Builder confidence falls for the seventh straight month, indicating continued weakness in the housing market.
• All the three HMI components worsen w/ the deepest m/m fall in potential buyers' traffic (-22.9%).
• Regional weakness is widespread w/ the largest m/m decline in the West (-25.0%).
Japan's surveys - for those available through June- show mixed and inconsistent readings. This suggests that the economy is going through some turmoil since indicators for the same economic concept are sometimes giving very different readings.
We saw that already with release of the industrial production report that showed abject weakness in contradiction to the S&P Global manufacturing PMI readings that are showing continued expansion in the sector.
Japan's economy watchers indexes are quite high-valued with standings in the 90th queue percentile except for the retail sector. However, even for the economy watchers framework, the future index is substantially weaker with only a 39th percentile standing.
All Teikoku indexes are below the 50th percentile which puts them below their median readings. However, most of them have readings that are in the 35th percentile to 40th percentile range with wholesaling being an exception and closer to its median value of 50%. The main readings from the METI indexes show the reading for industry has a 3.5 percentile rank standing which makes its signal much more like what we see from industrial production. The reading for services has a 47.9 percentile standing which agrees with the Teikoku framework and it's much weaker than the economy watchers indexes.
However, in the table we also evaluate these same indexes by looking at their ranking in terms of growth year-on-year. In terms of growth the economy watchers indexes are generally weaker but are still quite firm with the overall economy watchers index at a 75-percentile standing instead of the 90% standing it has on its level. The future index evaluated in terms of yearly changes falls from a 39-percentile standing to a 26-percentile standing – it becomes even weaker. The Teikoku indexes looked at it in terms of their changes have growth rates that are generally higher than their level standings; manufacturing for example has a 44-percentile standing (42% on levels), retailing has a 58-percentile standing (39% on levels), services have a 78-percentile standing (40.6% on levels) and so on.
The growth ranking from the METI indexes gives stronger readings than the level indexes with the industry ranking rising to 15th percentile from the 3.5 percentile, a stronger reading but still a very weak reading – and not much change in economic terms. However, for the tertiary (or services) sector the 48-percentile standing for the index level moves up to a 96-percentile ranking in terms of growth.
There also are readings for the leading economic index. The LEI when evaluated as an index level has a 78-percentile standing; however, evaluating the growth of the LEI index finds that standing falls to the 42nd percentile below its historic median.
The rankings of these metrics on growth or levels shows idiosyncratic differences. The economy watchers complex gets a little weaker, Teikoku get stronger, the METI readings are mixed, the LEI is weaker when evaluated on growth. There is little generalization here.
• Import prices rose 10.7% y/y during June.
• Fuel import prices posted strong monthly and yearly rises, while import prices excluding fuels declined over the month.
• Export prices rose 18.2% y/y in June, though the monthly details were mixed.
• June +1.0%, slightly higher than expected; May revised up to -0.1%.
• Ex-auto sales rise for six consecutive months.
• Auto sales rebound 0.8%; May revised up to -3.0%.
• Sales gain in most categories except for sales in building materials & garden equipt. stores, clothing & accessory stores, and general merchandise stores.
• Despite four-decade-high inflation and falling real incomes, consumers continue spending; restaurant & drinking place sales rise for five straight months.
• Shipments increase at more companies.
• New orders have modest net improvement.
• Share of companies paying higher prices still high but shows some easing.
• IP -0.2% in June, 0.0% in May, +0.8% in April.
• Manufacturing IP declines 0.5% w/ durable goods down 0.3% and nondurable goods down 0.8%, but mining rises for the second straight month.
• Motor vehicle output falls for the second consecutive month following two straight m/m rises.
• Consumer goods output decreases while business equipment edges up.
• Capacity utilization at a three-month low; mfg. capacity utilization at a four-month low.
In May, the finalized industrial production figures for Japan show that IP has fallen by 7%; the decline in manufacturing is 7.5% month-to-month. Yes, these are month-to-month percent changes; they show declines that are extremely severe. Not only that, but Japan has total industrial production falling for three months in a row. Manufacturing industrial production is falling for two of the last three months.
Over three months industrial production in Japan is declining at a 30.4% annual rate. In manufacturing it's declining at a 30.3% annual rate. Over six months the two series decline at about a 16% annual rate and over 12 months the two series decline by 4% or more. These are severe conditions and very discouraging trends.
Japan's economy is in a very difficult situation right now, experiencing declines in output and a yen that continues to get weaker.
Japan's household spending has been weak, having slipped by 0.5% in May on a year-over-year basis. Rising prices are putting Japanese consumers under pressure and making them cautious.
Japan also continues to suffer the repercussions from the ongoing China COVID-19 curbs. Japan's largest trading partners are China and after that the United States.
The chart at the top (Japan's IP Sequential Growth Rates) is the usual sort of growth rate chart for industrial production. It looks at sequential annualized growth over three months, six months and 12 months in an attempt to identify changing trends. It shows flatness and some weakness from mid-2020 onward (after the big drop in output) amid some rebounding as well as output has been volatile.
The table also shows growth rates over these various periods for industrial sectors as well as the quarter-to-date growth rates by sector. The QTD growth rates are nearly all showing declines in progress – mining is the only exception. I have also included the net growth in industrial production and in various sectors since COVID struck, providing a comparison with levels prevailing in January 2020. And that shows declines everywhere except for utilities.
• Initial claims increased 9,000 to 244,000 in the July 9 week.
• But continued claims eased 41,000 in the July 2 week.
• The insured unemployment rate returned to record low of 0.9%.