Japan's industrial production rose a stronger-than-expected 1.9 percent in June, government data showed on Monday, indicating an economic upturn was intact. The figure compared with a median market forecast for a 1.3 percent increase and followed a 1.3 percent decline in May.
Economists were optimistic about prospects for production given forecasts for rises in the coming months. The core of it, manufacturers' output, is expected to rise 2.2 percent in July and a further 3.7 percent in August, data from the Ministry of Economy, Trade and Industry showed.
"It was a strong figure, and the outlook appears solid," said Soichi Okuda, a senior economist at Sumitomo Shoji Research Institute. "Exports bound for Asia, especially Asean nations, have been a bit sluggish lately, but it looks like they are starting to pick up, which should bode quite well for production in the future," he added.
For April-June, industrial production rose 0.8 percent from the previous quarter, the third consecutive quarter of gains. Strong figures, especially for the forecasts, prompted the ministry to upgrade its assessment of industrial output, saying it is on a rising trend. Previously it had said output was on a moderately rising trend.
The wording of the assessment was the strongest since August 2000, when the ministry used the same wording to describe output. Output was robust on the back of firm exports, the ministry said. Sectors that gained included automobiles.
Data from the Japan Automobile Manufacturers Association on Monday showed that Japanese automobile production rose 7.2 percent in June from a year earlier to 1,019,502 vehicles.
Meanwhile, output data showed inventories for electronic devices grew 6.3 percent in June from May, prompting concerns about an inventory build-up in the high-tech sector.
Separate data on Monday showed an index that gives an early snapshot of manufacturing activity, the NTC Research/Nomura/JMMA Purchasing Managers Index, was a seasonally adjusted 55.7 in July, the highest since March and rebounding from a 10-month low of 54.3 in June. Japan's economy grew a real annualised 3.1 percent in January-March.
Economists expect growth to have slowed in the second quarter, but said demand centred on the private sector would remain firm despite an expected slowdown in export growth due to slower growth in the US economy.
Housing starts rose 4.7 percent in June from a year earlier, government data showed on Monday. That was lower than a median forecast in a Reuters poll for a gain of 6.0 percent, but marked the fifth consecutive month of year-on-year gains.
A slew of corporate earnings last week showed better-than-expected results at companies such as electronics and entertainment conglomerate Sony Corp, boosting Tokyo share prices. The International Monetary Fund declared on Friday that deflation in Japan had ended and said the economy was on a strong recovery path.
It said the growth outlook for Japan's economy was favourable and gross domestic product (GDP) growth was likely to reach 2.9 percent this year, slowing to just over 2 percent in 2007. Preliminary April-June GDP data will be released on August 11. Growth in the US economy for the second quarter was sharply lower than forecasts, with data on Friday showing US GDP rising at a 2.5 percent annual rate in the April-June quarter. That was less than half the robust 5.6 percent in the first quarter.
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