Japan's July industrial output falls 2.0% on month
TOKYO (Kyodo) -- Japan's industrial output in July contracted 2.0 percent from the previous month, affected by weakening overseas demand and China's economic slump, government data showed Thursday.
The seasonally adjusted index of production at factories and mines stood at 103.6 against the 2020 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report. The decline followed an upwardly revised 2.4 percent expansion in June.
Ideas:
The Japanese economy seems to be heavily dependent on industrial output and exports. And maybe even still heavily dependent on exports to China.
As global demand goes, so does Japanese production and for the most part, its not a linear upward projection, there are stops and starts related to manufacturing.
The seasonally adjusted index is just a number as the important reality is what is happening t each individual company.
Any index just give a glimpse what might be happening and again the reality is what is really happening with each manufacturing company.
Article:
The ministry downgraded its basic assessment for the reporting month, saying industrial production "fluctuated indecisively." It said last month that output in June was "showing signs of moderately picking up."
Among the 10 sectors reporting falling output, production machinery declined 4.8 percent from the previous month due to weakening overseas demand, dragged down by semiconductor manufacturing equipment, molds and machining centers, the data showed.
Ideas:
Unfortunately, fluctuations in manufacturing seem to be occurring quite often, due to raw material shortages, semiconductor shortage, logistics challenges related to China, and so on.
And of course global demand plays a part in manufacturing, and if demand is down or not so good companies have to adjust their manufacturing schedules to fit demand.
An economy is very complicated and with many different sectors as each sector reacts/responds differently to economic situations.
Its very rare for all sectors to be positive or positive growth at the same time, as with a market economy, there are those sectors and those in a sector who do better and some that doesn't have good growth or profits.
Article:
Production of electronic parts and devices also contributed to the overall drop with a 5.1 percent contraction, led by integrated circuit memory chips and fixed capacitors, amid the economic slowdown in China, a ministry official said.
Among the sectors reporting increased output, transportation equipment excluding motor vehicles jumped 9.6 percent, propped up by aviation engine and body parts.
Ideas:
Whether good or not so good, Japanese manufacturing seems to have placed a lot of emphasis in China, in China, which is natural as China as been the manufacturing base for the world for a while.
But recently China is having some challenges which is affecting many countries who have invested in China and manufacturing.
Even if a country just exports to China, with its manufacturing base in Japan, for the most part, it still has challenges as exports to China are having challenges as the Chinese economy has major challenges at this time.
Article:
Motor vehicles edged up 0.6 percent, helped by the easing of parts and material shortages that were caused by COVID-19 restrictions.
The index of industrial shipments fell 2.1 percent to 102.8, while that of inventories increased 0.9 percent to 106.7, rising for the third straight month.
Ideas:
Global demand for cars which is a major economic driver for the Japanese economy, both domestic and global exports.
Since 2020 Japan manufacturing has it share of challenges related to material and parts shortages.
There was also the challenges, in South-East Asia, with many manufacturing plants having to shut down because of COVID challenges in those countries.
The increase of inventories can be both a positive and negative. For example if inventories increase too fast or if there too many inventories, that might be an indication of demand is decreasing and or companies didn't estimate demand and they over-estimated what demand would be in the future.
If inventories are increasing, for example for three straight months now, that might be an indication that demand is decreasing and or demand was not estimated correctly,
Article:
Based on a poll of manufacturers, the ministry expects output to grow 2.6 percent in August and 2.4 percent in September.
The official pointed to the need to continue monitoring downside risks in overseas economies and the impact of higher prices.
Ideas:
While a poll of manufacturers is good, but no-one really can predict the future. Of course its good to see what companies are thinking but they can't predict the future exactly.
Even estimates or forecasts are never perfect they are just "guesses" as to what the future might be. Its good to have estimates or forecasts, but at the same time they again are just guesses about the future.
Global demand, for example in the US seems to be consistently strong, but not so sure about the EU with its higher prices and the EU central bank increase its key interest rate, which tends to decrease demand.
Have a nice day and be safe!
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