Japan's Factory Output Falls In November: ETFs In Focus

In November, Japan’s industrial output fell by 1.1% on a month-over-month basis majorly due to a pullback in output from the general purpose-machinery segment. The general and business-oriented machinery sector that rose sharply in October, declined by 11%, becoming the biggest drag on the production index, according to the recently released data. In November, the index of industrial shipments dropped by 1.4% but that of inventories increased by 0.2%.

The seasonally adjusted index of production at factories and mines stood at 104.7 against the 2015 base of 100, the Ministry of Economy, Trade, and Industry (METI) said in the preliminary report. In October, the index rose at its fastest pace since January 2015, with 2.9% growth on a month-over-month basis.

On a yearly basis, industrial production advanced by 1.4% in November, much below the 4.2% rise witnessed in the month of October. Post-release of the data, METI maintained its assessment of industrial production by saying the “industrial production is picking up slowly.”

Economists had forecast 1.9% decline for the month. Though the industrial numbers were better than expected, the outlook points toward a volatile ride for Japanese manufacturers in the months ahead. Manufacturers surveyed by METI, expect output to rise by 2.2% in December but fall 0.8% in January next year.

Japan was hit by a slew of natural disasters in the period ranging from July-September, affecting businesses and disrupting production. Also, the tourism industry got affected. However, economists expect the country to rebound in the last quarter of this year.

Per the Ministry, the trade frictions between Washington and Beijing didn’t affect the November data. However, the uncertainty surrounding the trade war is causing a lot of volatility in the global markets. This is a significant headwind for the export-reliant Japan economy.   

Per, Toru Suehiro, senior market economist at Mizuho Securities Co, in the absence of strong exports, it’s difficult to predict robust growth in the country’s output when domestic demand is expected to be more or less flat.

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