Global| Nov 29 2006Sharp Rise in Japanese Industrial Production for October; Capital Goods Especially Strong
Summary
Industrial production in Japan surged in October by 1.6%, more than reversing a 0.7% setback in September. Analysts polled by major press services had looked for September's decline to be repeated in October by 0.4% or 0.5%, so the [...]
Industrial production in Japan surged in October by 1.6%, more than reversing a 0.7% setback in September. Analysts polled by major press services had looked for September's decline to be repeated in October by 0.4% or 0.5%, so the result was a major surprise.
Gains were widespread, particularly among durable goods industries. Metals and machinery of various kinds all had sizable increases, as suggested by the selection in the table below. General machinery halted a three-month decline with a substantial 6.5% jump which brought it 10.8% above a year ago. Semiconductors and other electronics rose 2.8% in October, putting the volume of those industries' output a whopping 18.9% above October 2005.
Clearly, not all industries participated, with petroleum and related sectors showing some weakness. Petroleum refining and processing itself has fallen markedly, down 3.6% in October and 8.0% on the year-ago amount. Chemicals (excluding drugs) have been off modestly three months running, carrying them down 0.2% from a year ago. Textiles and ceramic products were also down. Plastics, paper, rubber and furniture all were little changed.
Nonetheless, the outsized increases in some key industries are striking. Analysts have been divided over whether the Japanese economy was ready to bear higher interest rates, and these results give further credibility to the Bank of Japan's general stance in that direction. Notably in this report, the main push was in capital goods; excluding transportation equipment, output in those industries jumped 10.1% in the month. Production in these sectors is by nature volatile, so long-range conclusions can't be drawn from the one-month move, but it points toward a firm economy, not a soft one, as had been hinted in other recent data.
| JAPAN, Seas Adj* | Oct 2006 | Sept 2006 | Aug 2006 | Year Ago | 2005 | 2004 | 2003 |
|---|---|---|---|---|---|---|---|
| Headline Series, 2000=100 | 107.8 | 106.1 | 106.8 | 101.6 | 101.3 | 100.2 | 95.0 |
| % Change | 1.6 | -0.7 | 1.8 | 7.4 | 1.1 | 5.5 | 3.2 |
| General Machinery | 6.5 | -1.6 | -0.2 | 10.8 | 5.2 | 16.7 | 7.2 |
| Electronic Parts, Etc | 2.8 | -0.5 | 5.0 | 18.9 | 0.8 | 13.3 | 17.8 |
| Chemicals (ex Drugs) | -0.4 | -0.9 | -1.4 | -0.2 | 0.6 | 1.4 | 1.6 |
| Petroleum & Products | -3.6 | -1.5 | 0.9 | -8.0 | 1.2 | -1.1 | 1.8 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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