Japan’s industrial production is likely to have grown weakly in May after posting a subdued growth in April. According to a Societe Generale research report, industrial output is expected to have increased 0.3 percent in May, following a growth of 0.5 percent in April.
This is weak when compared to the survey of production forecasts of METI that showed a 2.2 percent month-on-month growth in May, similar to April’s result.
The impact of earthquake in Kumamoto in April still remains, with disruptions in supplies and distribution exerting downward pressure on production activities. Moreover, the golden week during the start of May was longer than usual with some factories halting production for some time. This further exerted downward pressure on industrial output. Given that the real exports rose just 0.1 percent month-on-month in May, industrial production is unlikely to grow significantly, according to Societe Generale.
“In June, delayed export shipments will increase and industrial production for Q2 2016 will likely be positive, and recover from -0.3% QoQ in Q1 2016,” added Societe Generale.
Exports, consumption and production all are expected to have bottomed out. But with production continuing to stagnate indecisively, there is evidently no pressure pushing production up again. Industrial production is expected to “fluctuate indecisively”.
If uncertainty remains in global markets and economy, and if manufacturers adjust production on concerns of a stronger yen and increased inventory, output is expected to fluctuate indecisively and the economic growth trend would hover around 0 percent. This is a risk as a stronger economic growth rate as compared to the potential growth rate is a required condition for Abenomics to succeed, noted Societe Generale.
“We expect production to recover in the latter half of the year as the effects of the economic stimulus package start taking effect with the global economy recovering and exports expanding again,” stated Societe Generale.
The material has been provided by InstaForex Company – www.instaforex.com