Japan Industrial Output:

 https://mainichi.jp/english/articles/20210730/p2g/00m/0bu/032000c

Article:

TOKYO (Kyodo) -- Japan's industrial output rose 6.2 percent in June from the previous month, surpassing the level before the coronavirus pandemic, buoyed by a recovery in production of autos and semiconductor-making equipment, government data showed Friday.

The seasonally adjusted index of production at factories and mines stood at 99.3 against the 2015 base of 100, above the 99.1 posted in January 2020 and topping the figure for the second time since April this year, the Ministry of Economy, Trade and Industry said in a preliminary report.

Ideas:

The manufacturing industry seems to have recovered compared to the services sector. 

The manufacturing industry most likely is able to control its internal environment a little better than the services sector in that most likely it can limit the number contacts it workers has while in the working environment.

And of course global demand increasing again is very good, along with the idea that maybe in 2020, the buying of new cars was delayed and this year consumers are making up for waiting one year to buy a new car.

Article:

The result followed a downwardly revised 6.5 percent drop in May.

In the reported month, production in the auto industry including vehicles, steering devices and engines surged 22.6 percent from a month earlier, making it the biggest contributor to the index's rise.

"Although the global chip shortage continues to weigh, automakers and related manufacturers increased their production to address a sharp rise in demand," after the sector's May factory activity dropped 19.4 percent, a ministry official said.

Ideas:

There was also May Golden Week, which sometimes can stretch out for an entire week, which means productions facilities might be closed for all or some of that time. As a result a full week of a loss of production which might skew the production numbers.

Again the rise in consumer demand for cars, in Japan and globally, could be nothing more than delayed buying from an year earlier when the pandemic hit, and consumers decided to wait to buy as new car. 

Maybe there were worried about their jobs, a loss or drop in salary and or  didn't want to go out where other people were.

At the same time, last spring, spring 2020, the shipping and logistics sectors were not doing so good. So the shipping of cars maybe even in Japan, and or course globally, might have caused a temporary shortage in some global markets.

Article:

An 8.9 percent increase in production machinery on the back of growing in demand for chip-making equipment also helped push up the output index as a whole.

The ministry maintained the assessment, saying industrial output is "picking up."

Meanwhile, production of transportation equipment excluding motor vehicles declined 7.2 percent in the month.

The index of industrial shipments increased 4.3 percent to 96.3 while that of inventories was up 2.3 percent at 95.9.

Ideas:

As this article shows, the industrial sector is made up of many different areas or parts. And as such, they don't all increase or decrease at the exact same time.

Just like in an economy, which is made up of many different sectors, that don't all increase or decrease at the exact same time or same rate.

Again industrial output might be "picking up" but that doesn't mean every area of industrial output is picking up at the same rate. And economy is complex with many different areas and sectors and they never increase or decrease at the same rate.

Its interesting that there is now demand for chip-making equipment. That suggests that maybe some Japanese companies are innovating and or trying to get into the chip making business because maybe Japanese companies need to diversify their supplies bases and not rely on just one or a few suppliers in the future.

Article:

Based on a poll of manufacturers, the ministry expects output to fall 1.1 percent in July and rise 1.7 percent in August.

"Although there are ups and downs, it is expected that the uptrend will continue." the official said.

But he also pointed to downside risks deriving from the impact of the spread of highly contagious new variants of the coronavirus in Japan and abroad as well as the prolonged shortage of semiconductors on auto production.

Ideas:

And yes in any economy, even without the pandemic there are ups and downs and the manufacturing industry is highly dependent on the demand of consumers/customers, whether that is business to business or business to business to the end customer.

But now the virus situation of course has added some new variables into the mix.

As was seen last spring, it wasn't just a decrease in demand that caused challenges but also challenges in logistics/shipping including container ship challenges and even air freight challenges. 

And in some places challenges in the manufacturing plants too with the covid situation affecting manufacturing workers.

And then you have in supply challenges related to the potential shortage of semiconductor chips or anything else that is in short supply that manufacturers need.

Have a nice day and be safe!