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(Bloomberg) — Japan’s commercial output rose more than expected in October, providing a sign of economic resilience as advancing supply chains supported automakers and stock changes supported the electronic components industry. .
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Industrial production rose 1% from last month, beating economists’ forecasts for a 0. 8% increase, the industry ministry said on Thursday. Production increased by 0. 9% from a year earlier, also beating consensus estimates.
A separate report on Thursday showed retail sales fell 1. 6% in October from September, reversing after three months of gains. Economists had expected a 0. 4% increase. Sales rose 4. 2% year-over-year, beating estimates. Inflation accelerated for the first time in four months in October, prompting households to cut back on discretionary spending.
The production figures partly reflect the boost provided by the recovery of global supply chains. Industry data for October showed that Japanese exports held up largely thanks to a sharp increase in auto shipments, specifically to the United States. Auto production rose 2 percent from last month, even as Toyota Motor Corp. It was forced to temporarily suspend operations at some factories after an explosion at a component supplier’s factory.
Other winners come with electronics and machinery in general.
Automobile inventories increased by 5. 5% in October compared to September, which may simply imply a decrease in production in this sector in the coming months. General inventories increased 0. 8%.
“An improvement in the e-portions sector has boosted production as changes in inventories are taking place globally, but I doubt production will increase further from now given the combined situations in the U. S. and European economies,” said Harumi Taguchi, senior economist at S.
Increased production is part of a context of resilient business activity. Confidence in the country’s primary production sectors rose more than expected in September, three months earlier, the Bank of Japan reported in October, while confidence in the non-productive sector rose to a 32-year high. Among the points driving sentiment is China’s growing demand for chip-producing devices.
What Bloomberg Economics says. . .
“We expect stronger global demand for semiconductors to continue production. This is expected for exports of electronics and chip-making machinery, which would give advantages to Japanese manufacturers and suppliers further down the production chain.
—Taro Kimura, economist
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The weak yen is supporting the profits of giant brands while expanding the purchasing power of tourists returning in droves, supporting a wide diversity of corporations in the service sector.
The resilient influx of inbound tourists helped drive retail sales growth, with foreign visitor numbers returning to pre-Covid levels in October. Some economists say the recovery in foreign arrivals has almost peaked, casting doubt on the sustainability of what has been a bright spot. for Japan’s economy since the easing of pandemic-imposed travel restrictions.
Thursday’s reports will provide the Bank of Japan with new insights to review as the government assesses how close the economy is to achieving a positive cycle of wage and price expansion.
The Bank of Japan noted in its October Outlook report that exports and output were affected by a slowdown in the speed of recovery in foreign economies, but remained more or less stable, supported by a weakening of source-side effect constraints.
The central bank will hold its last political assembly of the year next month. Most BoJ watchers don’t expect any change.
(Adds comments from economists, details)
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