The third quarter of 2014 analysis of all industrial activites in Japan Summary

The Third Quarter of 2014Analysis of All Industrial Activities in Japan

Summary

November 27, 2014 releaseEconomic Analysis Office

Ministry of Economy, Trade and Industry (METI)

JAPAN(ENGLISH) http://www.meti.go.jp/english/statistics/bunseki/index.html(JAPANESE) http://www.meti.go.jp/statistics/toppage/report/bunseki/index.html

Contents

[Trends of All Industrial Activities] I-1 Outline of all industrial activities ............................1 I-2 Outline of industrial activities .................................2 I-3 Outline of tertiary industry activities ......................9 [Supply Trends for Final Demand] II-1 Outline of supply trends for final demand .............12 II-2 Supply trends for consumption .............................13 II-3 Supply trends for investment ................................14 II-4 Export trends .........................................................15 II-5 Import trends .........................................................17

Outline of all industrial activities • The indices of all industrial activities decreased for the second consecutive quarter, down by 0.1%

from the previous quarter. • In spite of increases in the indices of tertiary industry activities and construction industry activity, the

indices of industrial production decreased.

Index Level (2005 = 100, seasonally adjusted) Ratio to the Previous Quarter,

Contribution Ratio to Growth Rate

IV2013

I└

II2014

III-4

-3

-2

-1

0

1

2(%)

Indices of Government Services, etc.Indices of Construction Industry ActivityIndices of Tertiary Industry ActivityIndices of Industrial ProductionIndices of All Industrial Activities

70

75

80

85

90

95

100

105

110

115

I└

II2009

III IV┘

I└

II2010

III IV┘

I└

II2011

III IV┘

I└

II2012

III IV┘

I└

II2013

III IV┘

I└

II2014

III

Indices of All Industrial ActivitiesIndices of Construction Industry ActivityIndices of Industrial ProductionIndices of Tertiary Industry ActivityIndices of Government Services, etc.

Outline of industrial activities “Production trends” • The indices of industrial production decreased for the second consecutive quarter, down by 1.9% from

the previous quarter. • By type of goods, decreases were observed in all goods, such as durable consumer goods and capital

goods. • By type of business, production in 15 industries, including the transport equipment industry and the

information and communication electronics equipment industry, decreased.

Changes in the Indices of Industrial Production (by type of goods) (2010 = 100, seasonally adjusted)

Ratio to the Previous Quarter, Contribution Ratio to Growth Rate

-4

-2

0

2

4

IV2013

I└

II2014

III

(%) Producer goods

Non-durable consumergoodsDurable consumer goods

Construction goods

Capital goods

Industrial production

50

60

70

80

90

100

110

120

I└

II2009

III IV┘

I└

II2010

III IV┘

I└

II2011

III IV┘

I└

II2012

III IV┘

I└

II2013

III IV┘

I└

II2014

III

Industrial productionCapital goodsConstruction goodsDurable consumer goodsNon-durable consumer goodsProducer goods

Outline of industrial activities “Production trends by item”

<Major items that decreased> • Large passenger cars (for the second consecutive quarter)

• Small passenger cars (for the second consecutive quarter)

<Major items that increased> • Metal oxide semiconductor ICs (Memory) (for the first time in two quarters)

• Conveyors (for the first time in two quarters)

Changes from the Previous Quarter by Item and Contribution Ratio

Items that Contributed to DecreaseChangesfrom thePrevious

ContributionRatio

(% points)Items that Contributed to Increase

Changesfrom thePrevious

ContributionRatio

(% points)1) Large passenger cars -4.5 -0.25 1) Metal oxide semiconductor ICs (Memory) 25.7 0.292) Small passenger cars -16.6 -0.21 2) Conveyors 76.9 0.123) Desktop computers -37.5 -0.18 3) Metal oxide semiconductor ICs (CCD) 27.8 0.114) Engines for motor vehicles -5.5 -0.10 4) Fixed capacitors 8.5 0.055) Midget passenger cars -9.8 -0.09 5) Printing machinery 19.7 0.04

Outline of industrial activities “Shipment trends” • The indices of industrial shipments decreased for the second consecutive quarter, down by

0.8% from the previous quarter. • By demand, shipments for domestic demand decreased for the second consecutive quarter, and

shipments for exports increased for the first time in three quarters. • By type of goods, decreases were observed in durable consumer goods and construction goods.

Changes in Export Shipments and Domestic Shipments in relation to the Indices of Industrial Shipments

(2010 = 100, seasonally adjusted)

Ratio to the Previous Quarter, Contribution Ratio to Growth Rate

-8

-6

-4

-2

0

2

4

6

IV2013

I└

II2014

III

(%)Shipments fordomestic useShipments forexportsShipments

60

70

80

90

100

110

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II2009

III IV┘

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II2010

III IV┘

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II2011

III IV┘

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II2012

III IV┘

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II2013

III IV┘

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II2014

III

Shipments

Shipments for exports

Shipments for domestic use

Outline of industrial activities “Trends of Shipments from Domestic Corporations and Overseas Affiliates in Manufacturing Industries” • The indices of global shipments for the second quarter of 2014 increased for the fourth consecutive quarter, by

2.5% from same quarter of the previous year. • Looking at the breakdown, for domestic shipments increased for the fourth consecutive quarter, by 1.8% from the

previous year, for exports shipments decreased for the first time in four quarters, by 1.2% from the previous year, and overseas shipments increased for the tenth consecutive quarter, by 5.8% from the previous year.

• Looking at the indices of global shipments in terms of the changes in contribution ratio from the previous year, the rate for domestic shipments increased by 1.1% points, the rate for exports shipments decreased by 0.2% points, and the rate for overseas shipments increased by 1.7% points.

Changes in the Indices of Global Shipments The Indices of Global Shipments

(Manufacturing industries, 2010 = 100) The indices of Domestic Shipments and Overseas Shipments

(Compared to the same quarter of the previous year, Contribution ratio to Growth Rate)

15

20

25

30

35

40

45

50

0

20

40

60

80

100

120

140

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II20

III05

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II20

III06

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II20

III07

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II20

III08

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II20

III09

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II20

III10

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II20

III11

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II20

III12

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I └

II20

III13

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I └

II20

(%)

Overseas shipmentsFor exports shipments (Domestic shipments)For domestic shipments (Domestic shipments)Indices of global shipmentsIndices of domestic shipmentsIndices of overseas shipmentsRatio of overseas shipments in manufactuiring industries (item basis, right-hand scale)

14 (Year)

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II20

III05

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II20

III06

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II20

III07

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II20

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II20

III09

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II20

III10

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II20

III11

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II20

III12

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II20

III13

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II20

-40

-30

-20

-10

0

10

20

30

40(% , % points)

Overseas shipmentsFor exports shipments (Domestic shipments)For domestic shipments (Domestic shipments)

14 (Year)

Outline of industrial activities “Weakening relationship between sales of Japanese cars in the U.S. and exports of cars” • Due to overseas transfer of production bases of automobile manufacturers, etc., the sales of Japanese cars (passenger cars) in the U.S. has not linked to the export of cars from Japan.

• Statistical analysis results show the structural change has occurred in their relationship from July 2011. • From July 2011, the sales of Japanese cars (passenger cars) in the U.S. has been uncorrelated with the exports of

passenger cars from Japan, while the correlation coefficient between the sales of Japanese cars and local sales of the US affiliates (transport equipment) is 0.838.

The relationship of the sales of Japanese cars (passenger cars) in the U.S. and the shipment index of “passenger cars” for the U.S.

Shipments of passenger cars for the U.S. (2010 = 100)

The

sale

s of J

apan

ese

cars

（

10,0

00 ca

rs）

Jan. 2005 - Jun. 2011 Jul. 2011 - Jun. 2014

The

sale

s of J

apan

ese

cars

（

10,0

00 ca

rs）

Correlation coefficient = 0.736**

15

20

25

30

35

40

0 50 100 150 200

Correlation coefficient = 0.058

15

20

25

30

35

40

0 50 100 150 200

Becoming uncorrelated

Shipments of passenger cars for the U.S. (2010 = 100)

The relationship of the sales of Japanese cars (passenger cars) and the local sales of the U.S. affiliates (transport equipment)

The

sale

s of J

apan

ese

cars

（

10,0

00 ca

rs）

The

sale

s of J

apan

ese

cars

（

1000

00 ca

rs）

Correlation coefficient = 0.667**

15

20

25

30

35

40

100 200 300 400

Correlation coefficient = 0.838**

15

20

25

30

35

40

100 200 300 400

Correlation coefficient has become 0.838.

Jan. 2005 - Jun. 2011 Jul. 2011 - Jun. 2014

Local sales of the US affiliates (Transport equipment) (100 mil. USD)

Local sales of the US affiliates (Transport equipment) (100 mil. USD)

(Note) 1. ** indicates the correlation coefficient is significant at the significance

level of 1%. 2. All data is seasonally adjusted.

(Note) 1. ** indicates the correlation coefficient is significant at the significance

level of 1%. 2. All data is seasonally adjusted. 3. The local sales amount is adjusted based on the US CPI “New

vehicles”.

Outline of industrial activities “Inventory trends (1)” • The indices of industrial inventories increased for the third consecutive quarter, by 1.1% as compared to the end

of the previous quarter. • By type of goods, increases were observed mainly in durable consumer goods and producer goods. • By type of business, production in 11 industries, including the petroleum and coal products industry and iron and

steel industry, increased.

Changes in the Indices of Industrial Production Inventory (by type of goods)

(2010 = 100, seasonally adjusted)

Changes from the Previous Quarter, Contribution Ratio to Growth Rate

70

80

90

100

110

120

130

140

I└

II2009

III IV┘

I└

II2010

III IV┘

I└

II2011

III IV┘

I└

II2012

III IV┘

I└

II2013

III IV┘

I└

II2014

III

Industrial productionCapital goodsConstruction goodsDurable consumer goodsNon-durable consumer goodsProducer goods

-4

-2

0

2

4

6

IV2013

I└

II2014

III

(%)

Producer goodsNon-durable consumer goodsDurable consumer goodsConstruction goodsCapital goodsIndustrial production

Outline of industrial activities “Inventory trends (2)” • The inventory cycle of mining and manufacturing industry during the third quarter of 2014 continued “expanding

inventory stage”.

-15

-10

-5

0

5

10

15

-15 -10 -5 0 5 10 15

(% )

Cha

nge

in in

vent

ory

from

the

end

of th

e sa

me

quar

ter o

f the

pr

evio

us y

ear

(%) Change in production from the same quarter of the previous year

2014 III 2012 I

Inve

ntor

y ad

just

ing

stag

e

Inve

ntor

y ac

cum

ulat

ion

stag

e

Unintended decreasing stage of inventory

Expanding inventory stage

Outline of tertiary industry activities • Tertiary industry activities increased for the first time in two quarters, by 0.3% from the previous quarter. • By type of business, Finance and Insurance increased for the first time in three quarters, and 6 out of 13 types of

business in broad category increased.

Changes in Indices of Tertiary Industry Activities of Major Industry Sectors (2005 = 100, seasonally adjusted)

75

80

85

90

95

100

105

110

115

120

125

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II2009

III IV┘

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II2010

III IV┘

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II2011

III IV┘

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II2012

III IV┘

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III IV┘

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II2014

III

Electricity, Gas, Heat Supply & WaterInformation & CommunicationsTransport & Postal ActivitiesWholesale Trade & Retail TradeFinance & InsuranceMedical, Health Care & WelfareTertiary Industry

• During the third quarter of 2014, broad-raging personal services increased by 0.6% from the previous quarter, and broad-ranging business services also increased by 0.1% from the previous quarter, both up for the first time in two quarters.

Outline of tertiary industry activities “Trends of broad-ranging personal services and broad-ranging business services”

Changes in the Indices of Broad-ranging Personal Services and Broad-ranging Business Services (2005 = 100, seasonally adjusted)

Changes from the Previous Quarter, Contribution Ratio to

Growth Rate

IV2013

I└

II2014

III-4

-3

-2

-1

0

1

2

Broad-ranging business servicesBroad-ranging personal servicesTertiary industry activity (Overall)

(%)

90

95

100

105

110

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III IV┘

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II2010

III IV┘

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II2011

III IV┘

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II2012

III IV┘

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III IV┘

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II2014

III

Tertiary industry activity (Overall) Broad-ranging personal servicesBroad-ranging business services

Outline of supply trends for final demand • Supply for final demand of domestic products remained flat, at 0.0% change from the previous quarter. • Overall industrial supply for consumption decreased by 0.5% from the previous quarter, down for the second

consecutive quarter. • Overall industrial supply for investment increased by 0.1% from the previous quarter, up for the first time in two

quarters. • Exports increased by 1.0% from the previous quarter, up for the first time in two quarters, and imports decreased by

0.4% from the previous quarter, down for the second consecutive quarter.

Changes in the Indices of All Industries (Final Demand Components)

(2005 = 100, ratio to the previous year (quarter)) 2012 2013

Ratio to theprevious year

Ratio to theprevious year III IV I II III IV I II III

Total of final demand sector 0.9 0.6 -1.2 -0.1 0.7 0.3 0.7 0.5 1.2 -2.8 0.0Mining and manufacturing (Goods) -1.3 -2.3 -7.9 -0.4 4.8 -1.7 0.0 1.3 5.6 -6.7 -1.2Tertiary industries (Services) 1.3 0.1 0.1 0.2 0.0 -0.1 0.2 0.1 1.3 -2.2 -0.1

Consumption 1.2 -0.2 -0.3 -0.4 0.0 0.3 0.1 0.2 1.5 -2.4 -0.5Investment 2.4 3.9 -1.2 0.1 0.4 1.9 2.7 2.7 1.4 -5.7 0.1Exports -1.5 2.6 -5.0 -1.6 6.8 0.9 -0.2 1.8 4.1 -2.5 1.0Imports 2.3 3.7 0.0 -0.8 1.6 1.1 1.8 3.1 5.7 -5.7 -0.4

2013 20142012

Outline of supply trends for final demand “Supply trends for consumption”

• Looking at the trends of consumption in terms of supply from mining and manufacturing, the overall supply of durable consumer goods decreased by 8.0% from the previous quarter, down for the second consecutive quarter. The overall supply of non-durable consumer goods increased by 0.1% from the previous quarter, up for the first time in two quarters.

Changes in Overall Supply of Durable Consumer Goods

(2010 = 100, seasonally adjusted)

Changes in Overall Supply of Non-durable Consumer Goods

(2010 = 100, seasonally adjusted)

80

90

100

110

120

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II2009

III IV┘

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II2010

III IV┘

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II2011

III IV┘

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II2012

III IV┘

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II2013

III IV┘

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II2014

III

Non-durable consumer goods For houseworkFor culture and amusement Food and beverageClothes and footwear

40

60

80

100

120

140

160

180

200

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II2009

III IV┘

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II2010

III IV┘

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II2011

III IV┘

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II2012

III IV┘

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III IV┘

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III

Durable consumer goods For houseworkFor heating and cooling For furniture and equipmentFor culture and amusement Cars and motorcycles

Outline of supply trends for final demand “Supply trends for investment”

• The trends of investments in terms of supply from mining and manufacturing (overall supply of capital goods) increased by 1.8% from the previous quarter, up for the first time in two quarters.

Changes in Supply from Mining and Manufacturing (Overall Supply of Capital Goods) (2010 = 100, seasonally adjusted)

405060708090

100110120130140150160170180190200

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Capital goods For production equipmentFor electric power For communication and broadcastingFor agriculture For constructionFor transport For office workFor others

Outline of supply trends for final demand “Export trends” • Looking at the trends of export goods and services (on a quantity basis), in terms of the indices of all industries

(final demand components), exports of goods (mining and manufacturing industry) increased by 1.1% from the previous quarter, and exports of services (tertiary industry) also increased by 1.0% from the previous quarter, resulting in a 1.0% increase from the previous quarter for all exports.

• By region, exports of goods to East Asia, ASEAN, and the Middle East increased, while those to the United States and Europe decreased.

Changes in Exports by Region (Goods, 2010 = 100, seasonally adjusted)

60

80

100

120

140

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III IV┘

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III IV┘

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Total U.S.Europe ASEANEast Asia ChinaMiddle East

Outline of supply trends for final demand “Trends of the export dependence” • The export dependence (the percentage of exports to the total mining and manufacturing shipments) increased to

19.9%, up for the second consecutive quarter. Changes in the Export Dependence

(Note) Export dependence = (Export indices of each goods and mining and manufacturing industry × Export weight) / (Shipment index of each goods and mining and manufacturing × Shipment weight) × 100

15

16

17

18

19

20

21

22

23

24

25

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II2009

III IV┘

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III IV┘

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III IV┘

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III

Mining and Manufacturing

(%)

Outline of supply trends for final demand “Import trends” • Looking at the trends of import goods and services (on a quantity basis), in terms of the indices of all industries

(final demand components), imports of goods (mining and manufacturing industry) increased by 0.9% from the previous quarter, while imports of services (tertiary industry) decreased by 2.5% from the previous quarter, resulting in a 0.4% decrease from the previous quarter for all imports.

• By region, imports of goods from the United States, the Middle East, and ASEAN increased, while those from Europe and East Asia decreased.

Changes in Imports by Region (Goods, 2010 = 100, seasonally adjusted)

60

80

100

120

140

160

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III IV┘

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Total U.S.Europe ASEANEast Asia ChinaMiddle East

20

21

22

23

24

25

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III IV┘

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III IV┘

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Mining and Manufacturing

(%)

Outline of supply trends for final demand “Trends of import penetration rate” • The import penetration rate (the percentage of imports to the overall supply from mining and manufacturing)

increased to 24.0%, up for the second consecutive quarter.

Changes in the Import Penetration Rate

(Note) Import penetration rate = (Import indices of each goods and mining and manufacturing × Import weight) / (The indices of overall supply of each goods and mining and manufacturing industry × Overall supply weight) × 100