Japan: Industrial output growth gains steam in October
Latest reading: Industrial output grew 2.8% in month-on-month seasonally adjusted terms in October, which followed September’s 1.6% increase. The result was below market expectations but still strong, the fourth-best result since the end of the pandemic in May 2023.
The faster rise was largely driven by an upswing in the output of production machinery, potentially due to recovering demand from China. Since 2022, the output of production machinery has trended down, but in October, China’s government unveiled fresh stimulus measures to boost the country’s economy.
On an annual basis, industrial production rose 1.4% in October, contrasting September’s 2.6% fall. Moreover, the trend improved, with the annual average variation of industrial production coming in at minus 2.2%, up from September’s minus 2.3% reading.
Outlook: Our panelists forecast industrial production to shrink year on year for the sixth consecutive quarter in Q4 2024, topping off a torrid year for the sector, which has been weighed on by weak demand from China. That said, the low base of comparison created by this shrinkage will set the sector up for the second-strongest growth rate since 2017 over 2025 as a whole, according to our Consensus.
Panelist insight: Nomura’s Kyohei Morita and Kengo Tanahashi said:
“[The November survey of] production plans […] works out to a 1.1% q-q decline in output in Oct–Dec, and would mark a second straight quarter of decline. While we see a mixed picture by industry, we are concerned about the sharp 12.8% q-q decline projected for output in the electronic parts & devices sector. We have noted in the past that the production cycles in Korea and Taiwan, which tend to lead semiconductor production in Japan, have passed their peak. It therefore comes as no surprise to see signs of the start of a downturn in the semiconductor production cycle in Japan too, but we see a risk that the hit to overall industrial production could be greater than we had envisioned.”