Daily Management Review

Surge In Car Production Pushes Up Japan's Factory Output In November


Surge In Car Production Pushes Up Japan's Factory Output In November
In November, Japan's factory output increased at the quickest rate on record, as global supply chain constraints eased, allowing automobile production to recoup from its recent fall, raising hopes for a robust fourth-quarter economic comeback.
While improved manufacturing conditions give policymakers some comfort, ongoing global semiconductor shortages and new concerns from the Omicron coronavirus variety are projected to cloud the outlook for the world's third-largest economy.
Because of the rising output of motor cars and plastic products, factory production increased by 7.2 per cent in November from the previous month, the greatest increase since similar data became available in 2013 when comparable data first became available.
After gaining 1.8 per cent in October, production increased for the second month in a row, outpacing the 4.8 per cent increase predicted in an economists’ poll.
"Output recovered to where it was previously because car production rebounded," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"But seen from a global perspective, supply bottlenecks and especially the chip shortage are likely to be prolonged so that will slow down the recovery pace of output."
Car and other motor vehicle manufacturing increased by 43.1 per cent compared to the previous month of November, a new high, while plastic product manufacturing increased by 9.5 per cent.
Despite increased productivity, Japanese automakers are nevertheless hampered by continued global parts and chip supply concerns.
Toyota Motor Corp, Japan's largest carmaker, announced last week that manufacturing at five factories of the company in Japan would be halted in January owing to supply shortages and the health crisis. Chip supply shortages might have a long-term impact on the auto industry, according to analysts, as chipmakers prioritize creating cutting-edge semiconductors over less advanced chips.
"What is required for cars aren't the state-of-the-art chips," said Chihiro Ohta, general manager for investment research and investor services at SMBC Nikko Securities. "They need old-generation models."
Manufacturers anticipate a 1.6 per cent increase in December and a 5.0 per cent increase in January in output.
However, an official from the Ministry of Economy, Trade, and Industry (METI) warned that the monthly survey's estimates tended to be excessively optimistic.
The output of durable consumer goods increased by 39 per cent, but capital goods output remained steady compared to the previous month, according to analysts. Capital goods output is directly tied to the capital spending component of GDP.
According to a survey conducted by Reuters and released earlier this month, analysts anticipate Japan's economy to grow at an annualized rate of 6.1 per cent in the current quarter, rebounding from a third-quarter downturn with consumer and business activity likely to improve.
Separate data released on Tuesday revealed that the unemployment rate increased to 2.8 per cent from 2.7 per cent the previous month, while a job availability index remained at 1.15, unchanged from October.