Japan: Industrial production likely to surge 1.1% in August - Nomura

Research Team at Nomura, expects the Japanese August industrial production index to show a rise of 1.1% m-o-m.

Key Quotes

“Production-related indicators for August were generally solid, suggesting an increase in production: the current conditions DI for manufacturers in the Economy Watchers Survey rose 1.6 points m-o-m; the Japanese manufacturing PMI output index was up 0.8pt; new auto sales (total) rose 4.8% m-o-m; and real exports rose 2.6% m-o-m (seasonal adjustment for new auto sales and price/seasonal adjustment for real exports by Nomura). Furthermore, the survey of manufacturers' production plans for August projects strong growth of 4.1% m-o-m.

However, we think it overly optimistic to expect actual production to be in line with the 4.1% growth indicated in production plans as: 1) the realization ratio versus production plans tends to be around -2% on average; and 2) production plans call for growth in sectors in which there tends to be a large gap between production plans and actual production, including electronic parts/devices, general-purpose, production, and business-oriented machinery, and information and communication electronics equipment.

Meanwhile, a calculation by the ministry of economy, trade and industry projects a rise of just 0.1% m-o-m in the August industrial production index – quite a conservative projection, but we believe this is excessively bearish as it does not take into account the related statistics noted above.”