As the Lunar New Year holiday was later than usual, both production and export were substantially impacted. Production may have been brought forward in order to cope with increased export orders from other Asian nations (+4.1% mom in January, -3.1% mom in February and a 2.8% decline expected mom in March). Societe Generale expects industrial production to fall by 2.8% mom in March, from -3.1% mom in February. In Q1, economic growth in the US and China was weak, and the recovery of exports in volume did not accelerate enough (export volume grew +3.8% qoq in Q4 2014 and +1.0% qoq in Q1 2015). This has probably led toweak production in February and March. However, production in Q1 is likely to be slightly stronger at around +1.0% qoq after +0.8% qoq in Q4 2014. The production is likely to continue to recover, as export volumes pick up and now that the inventory adjustment has ended, following sluggish demand on the back of the consumption tax hike in April 2014. The Survey of Production Forecast indicates a strong recovery in production with a 3.6% mom rise in production trend for 2015 will depend on how strongly exports can recover thanks to the US economic recovery. Assuming US economic growth above 3% in 2015 as well as firm domestic demand on the back of an expansion in aggregate wages, we expect the production trend to strengthen going ahead.
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