Japan Industrial Output: Updated May 4, 2024.

 

Japan industrial output falls for 2nd year in row on weak chip demand

Article Source:  https://mainichi.jp/english/articles/20240430/p2g/00m/0bu/006000c

Ideas:

There are always going to be business cycle type changes and output doesn't move in a linear upward trend each quarter or each year. 

At the same time, an index of 102.8 is not bad considering the base year is 100 so 102.8 is still good and not a real contraction. Maybe its not exactly what industrial stockholders were looking and hoping for. 

Demand for semiconductor equipment might be going through a transition period, especially in China, as it seems the Chinese economy is going through some kind of change needed to move it from the boom of the 90's to the future boom beyond 2024.

The industrial sector might have many separate parts and if some of the parts not operating at full capacity it shows in the production index.

But at the same time, just because there are slowdowns in different economies doesn't mean all is not good as there might be positive signs in other economies.

Auto production has always been a strong economic driver for the Japanese economy, both in terms of exports and domestic sales too.

The chip shortage goes all the way back to 2020 and the beginning of the pandemic, and back then there was a BBC article by a German auto company CEO, that said the chip shortage could last more than two years.

Industrial shipments are related to global demand and if demand, but still at 102.0 its still relatively good.

Inventories are another story. For example if inventories start to buildup and or remain in warehouses for too long, it could be a strong indicator of decreasing demand in the Japanese economy and global economy.

If inventories trend toward continuous decreasing it might mean demand for some products are strong or still strong. Or it might mean the forecast for certain products was good and not over estimated.

Even the industrial output for March was at 101.1 which is still good, but maybe, as usual, not what investors are looking for.

Again, industrial shipments increased which means global demand for some products were still good even though it was only at 100.0, which is still not bad. 

The problem is, investors always seem to want perfect outputs or results and when results are only good but not perfect, they panic.

But inventories increased to 102.7 but does that represent the amount sitting in warehouses or does that represent shipments of inventories.

As seen there are 15 different industrial sectors, and they all don't move up or down at the same time, as nine increased in production and six saw decreases in product, which is very representative of what an economy does, as all sectors don't move up or down the same.

The language... "showed weakness while fluctuating indecisively" is just normal activity as all sectors, again, don't increase or decreased exactly the same, just like an economy, as all the sectors don't move up or down exactly the same.

April and May are the beginning of the new fiscal year in Japan, as as such maybe many businesses planned to increase production and output during those months.

Also Golden Week is in May, which is a week-long holiday period for Japanese society, so it will be interesting if production increases or decreases in May due to the week-long holiday, when many take vacation time.

Have a nice day and be safe!