Industrial Production, Japanese Economy

U.S. industrial production edged down 0.1 percent in October after having advanced 0.8 percent in September. Japan surprised the world over the weekend with word that its economy, the world’s third largest, shrank an annualized 1.6 percent during the three months ending in September.

U.S. industrial production edged down 0.1 percent in October after having advanced 0.8 percent in September, the Federal Reserve reported on Monday. In October, manufacturing output increased 0.2 percent for the second month in a row, but mining declined 0.9 percent and the output of utilities dropped 0.7 percent.

In the manufacturing sector, the production of nondurable goods rose 0.3 percent, while the production of durable goods edged up 0.1 percent. Among durable goods industries, machinery posted the largest increase, 1.3 percent, while wood products, computers and electronic products, and furniture and related products, all recorded gains of more than 0.5 percent. These gains were partially offset by declines of more than 1 percent for cars and car parts. The decline in motor vehicles and parts resulted from a decrease in vehicle assemblies, which fell 400,000 units to an annualized rate of 11.1 million, the Fed said.

At 104.9 percent of its 2007 average, total industrial production in October was 4 percent above a year earlier. Capacity utilization for the U.S. industrial sector decreased 0.3 percentage points in October to 78.9 percent, which is 1.2 percentage points below its long-run (1972–2013) average.

Japan Sinks in Recession Again 

Japan surprised the world over the weekend with word that its economy, the world’s third largest, shrank an annualized 1.6 percent during the three months ending in September, according to the Japan Cabinet Office. That was the second straight drop, with the annualized drop during the previous quarter coming in at 7.3 percent. Though there’s no hard-and-fast rule on the definition, two contractions in a row are often thought of as a recession.

It’s possible that a recent increase in the national sales tax put a dent in consumer spending, which drives about 60 percent of the Japanese economy. The tax increased from 5 percent to 8 percent in April, as part of an effort to reduce the country’s massive public debt.

At over 214 percent of GDP, Japan’s public debt is exceedingly high; by comparison, U.S. public debt is about 80 percent of GDP.

Since the worst of Great Recession, Japan has experienced a roller-coaster ride in terms of economic growth, with strings if quarterly contractions alternating with quarters of growth. Sluggishness in the Japanese economy affects the rest of the world in various ways, but in particular this time it might continue to put downward pressure on the price of oil as Japanese demand remains tepid.

Wall Street ended Monday mixed, with the Dow Jones Industrial Average gaining 13.01 points, or 0.7 percent; the S&P 500 was up 0.07 percent as well. The Nasdaq dipped 0.37 percent.