Japan: Industrial activity dips in August
Latest reading: Industrial output slid 3.3% in month-on-month seasonally adjusted terms in August, which contrasted July’s 3.1% increase and was significantly below market expectations. August’s reading was due to a sharp drop in the output of motor vehicles, electrical machinery plus ICT equipment, and production machinery.
August’s fall likely reflected three factors: A likely drop in real exports amid weak external demand, a series of natural disasters that impacted production and disruptions to auto output as a result of a certification scandal.
On an annual basis, industrial output fell 4.9% in August (July: +2.9% yoy). Meanwhile, annual average variation of industrial production was minus 2.4% in August, matching July’s figure.
Outlook: August’s print means industrial production was down 0.3% in July–August from the prior three months (Q2: +2.7% qoq s.a.), boding poorly for the sector’s growth in Q3’s GDP statistics—due for release on 15 November. However, industrial production is likely to fare better ahead as the aforementioned three drags fade.
Panelist insight: Kengo Tanahashi and Kyohei Morita, economists at Nomura, sounded a note of caution regarding a recovery:
“We think the underlying economic recovery remains intact. Nevertheless, we need to be aware that halts to production in the automobile industry could hamper the recovery in industrial production through 2024 Q4.”