Industrial production is expected to grow by 0.5% mom in April. In addition to the end of the inventory adjustment after the consumption tax hike in April 2014, the Lunar New Year holiday was later than usual, and production in January showed strong growth of 4.1% mom. In February and March, production experienced a setback which was greater than anticipated. This was mainly because economic growth in US and China in Q1 was weak, and Japan’s export recovery in volume did not accelerate (3.7% qoq in Q4 14, 1.0% qoq in Q1), which has probably resulted in weaker production growth (-3.1% mom in February, -0.8% mom in March). In April, export growth is likely to not be as strong as expected, and we can probably only expect a limited rebound in production in April. It is likely to be much weaker than the Survey of Production Forecast which indicated strong growth of +2.1% mom. Production is expected to be in a firm recovery trend as inventory adjustment has ended and export volume is recovering. The production trend for 2015 will depend on how strongly exports can recover thanks to the US economic recovery. “Assuming firm domestic demand on the back of an expansion in aggregate wages, we expect the production trend to continue to strengthen”,Says Societe Generale.
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