Factory output up on iPhone in surprise

Bloomberg

Factory output unexpectedly rose the most since December on production of parts for devices including Apple Inc.’s iPhone, providing a bright spot in an economy poised to shrink for a second straight quarter, the Ministry of Economy, Trade and Industry said Friday.

Industrial production in October increased 1.8 percent from the previous month, when it dropped 4.1 percent, METI said. That compares with economist estimates for a 2 percent fall. Production of electronic parts and devices rose 14.7 percent from September, the biggest advance since at least 1998, the ministry said.

The report underscores how reliant Japan’s electronics industry has become on variations of the iPhone, the newest of which sold 2 million units in first-day orders, in an economy at risk of recession from a contraction in Europe and a diplomatic dispute with China. The latest version of the device, introduced Sept. 21, may have also boosted South Korean industrial production, Friday data showed.

“Japanese manufacturers are extremely dependent on Apple,” said Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo who follows technology companies, including Sharp Corp. and Toshiba Corp. “Production rises and falls in line with the timing of Apple product releases.”

Consumer prices excluding fresh food were unchanged from a year earlier, the statistics bureau said Friday. The median of 23 estimates was for a 0.1 percent drop. The jobless rate stayed at 4.2 percent for a third month, a separate report said.

Much of the increase in October production was from smartphone displays and memory chips for export to Asia, the trade ministry said. Sharp and Japan Display Inc. are boosting production of liquid-crystal displays for smartphones and tablets as demand increases for iPhones in the pre-Christmas period, Ace’s Yasuda said.

“Japan’s economy will probably return to growth in the first quarter of 2013, after possibly having two consecutive quarters of contraction” through December, Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo, said before the report. “The U.S. economy is looking solid and China’s economy may have a clear rebound this quarter, boding well for Japanese exports.”

Japan’s economy may fall into a recession in the three months ending in December, based on the definition of a recession as two consecutive quarters of contraction.