Tuesday, June 28, 2011

Japan Industrial Production Jumps Up in May *+5.7% highest since March 1953*


Japanese automakers restarted production lines in May

Japanese factory output jumped by the most in almost 60 years in May as manufacturers restore supply chains damaged by the massive earthquake and tsunami in March, the latest evidence the economy is headed for a "V-shaped" recovery from the disaster. Industrial output rose 5.7 percent in May, above the median market forecast for a 5.5 percent increase and a 1.6 percent gain in April, the Ministry of Economy, Trade and Industry said. It was the second-biggest increase on record after a 7.9 percent rise in March 1953. Output tumbled a record 15.5 percent in March after a magnitude 9.0 earthquake and a deadly tsunami struck Japan's northeast coast on March 11, triggering a nuclear disaster.

"The report shows that the auto industry is a strong driving force” in boosting production, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The post-quake shock is running its course and production is undergoing a V-shaped recovery.” "Forecasts for June are still high, but are not so high for July, suggesting a slight slowdown in the front loading of production," said Shunji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. "Still the trend is healthy. Things are moving in line with the BOJ's scenario. It may be necessary for the BOJ to do something more to support small firms in areas damaged by the quake, but the need for broad-based monetary easing doesn't seem that strong."

The gain in transport equipment output was the biggest since comparable data became available in 1998. Carmakers are hiring temporary workers, signaling the industry’s recovery from the earthquake. Toyota Motor, the world’s biggest carmaker, said last week it would employ as many as 4,000 workers from mid-July as it prepares to ramp up production in October. Nissan has said it has begun hiring as many as 200 temporary workers to help boost output. “The recovery has been fast,” Nissan’s Chief Executive Officer Carlos Ghosn said on June 22. “Today we are near normal production levels” in Japan, he said.

“Production by the manufacturing industry will likely return to the pre-quake level by summer, but the risk will be a slowdown in the recovery pace after then,” Hiroshi Shiraishi, an economist at BNP Paribas SA in Tokyo, said before the report. “Power supply problems could continue over several years and uncertainties surrounding the overseas economy are growing.”

The official statement of the Japanese Ministry of Economy, Trade, and Industry regarding the May Indices of Industrial Production was, "Industrial Production in May increased 5.7% from the previous month, showing an increase for the second consecutive month. It showed a decrease of 5.9% from the previous year. The index in May was 88.8 (seasonally adjusted)". Key points of the report were:
♦ Industries that mainly contributed to the increase are as follows: 1.Transport equipment, 2.General machinery, 3.Chemicals (excl. Drugs), in that order.
♦ Commodities that mainly contributed to the increase are as follows: 1.Large passenger cars, 2.Small passenger cars, 3.Large trucks, in that order.
♦ Production, Shipments, Inventory increased, Inventory Ratio decreased.
♦ According to the Survey of Production Forecast in Manufacturing, Production is expected to increase in June and July.
♦ Industrial Production is on a recovery trend after the Great East Japan Earthquake.

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