Business

Recovery ongoing despite June output fall: METI

Although industrial production fell a seasonally adjusted 1.3 percent in June from the previous month, the recovery trend remains unchanged, the Ministry of Economy, Trade and Industry said Thursday.

The index of output at mines and factories registered 100.7 in June against the base of 100 for 2000, the ministry said in a preliminary report. It was the first decline in four months.

The decline in production stemmed mainly from a 2.3 percent fall in the general machinery sector and a 3.3 percent drop in output of electrical machinery, it said.

But METI maintained its assessment that industrial production remains on a gradual recovery trend.

“Although the figure was negative for the reporting month, we expect industrial output to rise in the coming months and do not see any changes in the trend,” a ministry official said.

The ministry predicted industrial production would expand 1.6 percent in July and 1 percent in August, partly due to strong demand expected for electronic parts and devices as well as some seasonal goods.

But private-sector economists point out that production in May and June fell far short of the government’s predictions.

Production growth in May was 0.5 percent; the ministry had forecast a rise of 3.5 percent. The June decline was 1.2 points larger than the METI forecast of a 0.1 percent fall.

“It is unusual for the production index to fall well below government predictions for two months in a row, and this could be a sign that production activity is undergoing some changes,” said Takahide Kiuchi, a senior economist at Nomura Securities Co.

The changes could include a “short break” in the current economic recovery led by digital home appliances, Kiuchi said.

The pace of industrial production growth is likely to slow gradually in the near term, although exports are expected to remain steady, he said.

On a quarterly basis, the ministry said industrial production gained 2.6 percent in the April-June period from the previous quarter to a seasonally adjusted 101.3. This was the fourth consecutive quarterly increase and underlines the recovery trend in production, METI said.

The index of industrial shipments shrank 1.4 percent in June to an index reading of 102.9, down for the first time in four months, the ministry said.

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