Japan's July Industrial Output:

 https://mainichi.jp/english/articles/20210831/p2g/00m/0bu/025000c

Article:

TOKYO (Kyodo) -- Japan's industrial output dropped 1.5 percent in July from the previous month due to the prolonging global chip shortage and the disruption in the supply of parts caused by the coronavirus pandemic in other Asian countries, government data showed Tuesday.

The seasonally adjusted index of production at factories and mines stood at 98.1 against the 2015 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report. The results followed an upwardly revised 6.5 percent rise in June and a 6.5 percent fall in May.

Ideas:

A 1.5 percent drop doesn't seem that much when news reports were saying companies such as Toyota were planning on major cutback on production in the near future.

The global chip shortage not only effects car companies but any electronic product these days as most if not all electronic products uses one or more chips.

And then add in the supply parts shortage due to the pandemic situation in other Asian countries and a 1.5 percent drop in output doesn't seem that much as maybe it could have been worse.

A decrease in May and then a increase in June illustrates how volatile production is at the present time. Some months are up and some months are down, as there are still major supply chain challenges globally and in Asia.

Article:

In July, production in the auto industry declined 3.1 percent from a month earlier as passenger car production dropped, and output in the electrical machinery and information and communication electronics sector fell 3.4 percent due to weak production of lithium-ion batteries and air conditioners.

"The sectors are experiencing a major disruption in the supply of parts, especially from Southeast Asia, due to restrictions in economic activities" stemming from surges in coronavirus infections, a ministry official said.

Ideas:

Global supply chain challenges are still causing disruptions in manufacturing and most likely are not going away in the near future.

One BBC article recently mentioned that the chip shortage could last as long as two years. And its not just the car companies but any company now that manufactures electronic products and any company that uses electronic products in their manufacturing equipment might have disruption challenges in the near future.

And then again add in the pandemic situation in other Asian countries and the situation becomes even more challenging for Japanese companies not to mention every company globally.

Article:

The official also said production of automobiles and air conditioners were affected by the chip shortage.

The production machinery sector rose 1.6 percent, however, thanks to robust domestic and foreign demands for machines to manufacture semiconductors.

The ministry maintained its basic assessment that industrial production is "picking up."

Ideas:

There are always positives and negatives related to any economic situation/problem. While many companies are having challenges with chips shortages and some companies having challenges with supply chains problems, some companies might actually might be benefitting.

For example the production machinery sector related to the machines needed to produce chips is most likely doing quiet well. Probably there is an increase in production plants related to the production of semiconductors and maybe more companies see the need for more chips and they think they can meet the need for more chips.

Most likely any company that is now in the business related to the production of machines for chip production is going be very busy in the near future.

Article:

The index of industrial shipments decreased 0.6 percent to 96.1 while that of inventories was down 0.6 percent at 95.1.

Looking ahead, manufacturers polled by the ministry expect output to gain 3.4 percent in August and 1.0 percent in September.

"Despite the fall this month, we expect output levels will remain relatively high," the ministry official said, though adding that the recent expansion in virus cases in other Asian countries may not have been factored in in the survey conducted in early August.

Ideas:

But at the same time, if demand becomes too much and companies can't keep up with demand its logical that inventories are going to be down as maybe demand is high but companies just can't keep up with the demand.

So if there is a shortage usually in supply and demand a shortage usually means prices might increase as companies try to maintain their profits despite being able to sell less because of the shortage.

Output levels might remain at a relatively high level due the fact that Japan is still a major manufacturing country and as such while some areas or parts of the manufacturing sector might have supply chain challenges or some might have chip shortage challenges, that doesn't mean all manufacturing companies are experiencing the same challenges.

As such the manufacturing industry in Japan most likely will continue to have output gains in the near future.

Have a nice day and be safe!