Rising Exports Fuel Rise in Japanese Industrial Production

The ZEW indicator of investors sentiment in Germany declined for the third month in December.  The percent balance of opinion on macro expectations six months ahead is now at 50.4%, down 7.3 percentage points from the peak of 57.7% in September.  The current  level, however, is well above the long term average of 27.0%.  Although the balance between those respondents who view current conditions negatively over those who view them positively is still high at 60.6%, it declined five percentage points in December and is well below the peak, 92.8%, reached in May of this year when it was hard to find any optimists.  The first chart shows the percent balances for current conditions and the macro expectations over the next six months.

The survey is based on the opinions of 277 investors and analysts and took place from November 30 through December 14.  During that period, data on new orders, industrial production and retail sales for October were announced.  Industrial Production was down 1.86%, new orders for manufacturing were down 2.57%, motor vehicle sales were down 1.37% and retail sales, excluding motor vehicle sales, were flat.  These data suggested that the economic expansion might be somewhat slower than earlier expectations and may have dampened some of the optimism of the participants.

In spite of the decline in the overall outlook, participants in the survey are still relatively optimistic regarding the profit outlook.  There are only four industries out of the thirteen industries surveyed where the current balance of opinion is for lower profits.  These are: banking, construction, utilities and services.  They are shown in the second chart.   Of the remaining industries--insurance, chemicals/pharmaceuticals, steel/metal, electronics, machinery, telecommunications, information technology--the balance of opinion is for higher profits; and for vehicles/automotive and consumption/trade, the balance of opinion is for smaller losses.  The balance of opinion for higher profits has risen significantly for the information technology, machinery, steel/metal and chemicals/pharmaceuticals industries, as can be seen in the third chart.