Semiconductors drive Japan's industrial output rise for 4th quarter

Japan's industrial output rose for the fourth straight quarter in July, up 0.1% MoM, beating forecasts. The increase was led by gains in semiconductor-related production and machinery. Retail sales also saw a robust increase of 2.4% from June.

Japan's industrial output rose for the fourth consecutive quarter, beating market expectations with a 0.1 per cent (month-on-month) increase, supported by gains in semiconductor-related production, according to data released by the Ministry of Economy, Trade and Industry (METI) for the month of July.

Japan's industrial production rose 4.1 per cent on YoY basis. The increase in industrial production was driven primarily by production machinery, followed by inorganic and organic chemicals, and electronic parts and devices, as per the release.

The seasonally adjusted index of production at factories and mines came at 104.7 against the 2020 base of 100, as per ministry's preliminary report. Meanwhile, the country's "inventory ratio decreased," falling 2.0 per cent on YoY on the back of "electronic parts and devices, iron, steel and non-ferrous metals, and other manufacturing" industries, the Ministry noted.

Retail Sales and Consumer Activity

In a separate set of data, the ministry provided a positive signal on consumer activity, with retail sales rising 2.4 per cent in July from the previous month. On a YoY basis, retail sales grew 4 per cent, beating market estimates. Meanwhile, the country's household spending had declined for seven consecutive months through June, as consumers, faced with rising prices for everyday necessities, cut back on discretionary purchases.

Sector-Specific Performance

Ten sectors recorded increases in output, led by production machinery, which rose 5.1 per cent on the back of stronger exports of equipment used in semiconductor and flat-panel display manufacturing. Output of inorganic and organic chemicals continued its recovery, increasing 6.0 per cent. The rise followed the completion of maintenance work at several major oil-derived naphtha production facilities, which helped boost output of synthetic rubber, polypropylene and ethylene.

Apart from this, transport equipment excluding motor vehicles fell 4.7 per cent, largely due to a drop in orders for aircraft components. Meanwhile, output in the electric machinery and information and communication electronics equipment sector remained unchanged.

The index of industrial shipments surged 2.2 percent to 103.5, while that of inventories increased 0.5 percent at 98.1.

Future Projections

Based on a survey of manufacturers, the ministry estimates output to climb 6.4 percent in August and contract 4.2 percent in September. The consolidation is expected to come on the back of "production machinery, transport equipment, electronic parts and devices," the Ministry noted. (ANI)

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