Japan Industrial Output:

 Article Source: https://mainichi.jp/english/articles/20221031/p2g/00m/0bu/015000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in September fell 1.6 percent from the previous month for the first decline in four months, affected by a slowdown in overseas economies, government data showed Monday.

The seasonally adjusted index of production at factories and mines stood at 98.6 against the 2015 base of 100, the government said in a preliminary report, keeping its basic assessment that output is "showing signs of picking up moderately."

The drop followed an upwardly revised increase of 3.4 percent in August, the Ministry of Economy, Trade and Industry said.

Ideas:

Industrial output it seems is always seasonal and or is never increase always in a linear trajectory as there are always going to business cycle challenges.

So even though there was a decrease of 1.6 percent, it should not be enough to really cause too much concern, as the Ministry of Trade mentions its most picking up moderately.

From a 3.4 increase in August to a 1.6 percent decrease in September resembles a business cycle type situation where are always going to be increases and decreases through a normal year.

Article:

Of the 15 industries covered by the survey, 11 logged output declines and four showed increases.

By sector, motor vehicles saw the biggest plunge of 12.4 percent from the previous month, dragged down by falls in motorbikes and vehicle components. The industry reported a decrease for the second consecutive month.

Inorganic and organic chemicals saw a decrease of 6.3 percent and production machinery a 1.8 percent fall, dented by parts and material shortages driven by rising prices, according to the data.

Ideas:

An economy is very complex as each sector doesn't show the same level of growth month, each quarter, or even each year.

Every sector has its own unique circumstances and each own set of variables that can drive supply and demand. 

It appears that many or some sectors are still experiencing parts and material shortages, will definitely affects overall supply and demand. 

It seems Japan industry or parts of Japan industry is still struggling with its supply chains which might be directly influence by what is happening China. 

Article:

The four industries reporting output rises included chemicals excluding inorganic and organic chemicals and medicine, which saw an increase of 6.8 percent from the previous month, the ministry said.

The index of industrial shipments decreased 2.4 percent to 95.2, the first drop in four months, while that of inventories increased 3.0 percent to 103.9, increasing for the fourth straight month.

Ideas:

Whenever there is a significant increase in inventories, it's a sign that demand is decreasing and or supply chain challenges.

However, inventories can be subject to seasonal variations and should not be considered a major change in demand and or supply chain challenges overall.

Even though inventories saw an increase for the fourth straight month its still not that much of a big deal as a reading of 103.9 is probably still not that much of an increase.

Article:

Based on a poll of manufacturers, the ministry expects industrial output to decline 0.4 percent in October and rise 0.8 percent in November.

"We would like to keep a close eye on the impact of a possible increase in COVID-19 infections in the future on domestic and overseas economies and material parts, as well as on the development of rising prices," a ministry official said.

Ideas:

As can be seen, industrial output is expected to decrease in October but increase in November, which shows industrial output is very seasonal and or subject to supply, demand and or supply chain challenges.

Supply chain challenges seem to a concern of the ministry and since the pandemic Japan industry has been having supply chain and parts material supply challenges.

Rising prices are still a major concern for many Japanese businesses and their profit margins continue to be compromised which means they most likely have to pass on their increase in prices to the next in the supply chain, including the final consumer.

Have a nice day and be safe!