The Japanese industrial production is recovering slightly in October. Compared to the previous month, it jumped by 0.5%, according to the preliminary data from the Ministry of Commerce. However, growth is below the median market expectations for a 1.9%. Also the Ministry of Commerce revised the decline for September to 1%.
Although October’s results are somewhat disappointing, the forecasts for accelerating factory production suggest that Japan may continue its longest sustained period of growth for more than a decade as exports and domestic demand continue to drive the economy.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect production to grow by 2.8% in November and 3.5% in December.
The industrial forecasts suggest that we will see pretty good results in October-December, but we need to confirm that companies actually increase production as much as they expect.
The industrial output rose in October due to increased production of semiconductors, car parts and machines used to produce flat panel displays, according to data from the Department of Commerce on Thursday.
The breakdown of December forecasts shows that manufacturers of construction equipment and heavy machinery needed to produce other goods expect their output to reach a record high, a ministry official said during a briefing. This reflects the strong global demand for capital goods and increased capital spending abroad.
The data on industrial production is another reason for optimism in terms of economic prospects. Many economists expect consumer spending to resume in the second half of this year due to a tight labor market.
The capital expenditures are likely to continue to expand as companies invest in new equipment to cope with labor shortages and capacity constraints, economists say. The Japanese economy grew faster than expected in the third quarter due to strong exports, which reported the longest period of uninterrupted growth for more than a decade, earlier this month. The central bank of Japan is likely to point to stable economic growth in the country as an indicator that price pressures will ultimately increase and inflation will reach the 2% target.