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Japan Power Use Signals More Active Factories: Chart of the Day

Chart of the Day
Source: Bloomberg

Japan’s industrial production probably expanded for a fifth straight month, based on data that shows electricity demand by manufacturers has rebounded since falling to an eight-year low in February, excluding a period during the global financial crisis.

The CHART OF THE DAY tracks an index of Japan’s electricity consumption for industrial use in million-kilowatt hours through April and the month-on-month percentage change in factory output through March. Power demand, considered a leading indicator of economic activity, has risen from February, when manufacturers used less electricity than in any period since February 2003, except for the first five months of 2009.

“Machinery and appliance manufacturers have become the biggest industrial users of power,” Yu Nagatomi, an electric power researcher at Japan’s Institute of Energy Economics, said in an e-mail. “While it’s hard to say how much electricity use will recover, since it depends on how much manufacturing expands and on progress toward energy efficiency, it will probably be flat or increase slightly.”

An improvement in factory output signaled by the power data would be a boon to Prime Minister Shinzo Abe’s ruling Liberal Democratic Party as it touts its economic record ahead of upper house elections in July. Toyota Motor Corp. in April lifted its domestic daily output by 10 percent over original projections for that month, according to Kyodo News. Industrial production data is to due be reported in Tokyo on May 31.

Electricity use by factories last month was 21.3 billion kilowatt-hours following a five-month high in March. Industrial power consumption typically drops in April after rising in March, when manufacturers seek to complete production orders before the close of their fiscal year, Nagatomi said.

Abe came to power in a landslide election in December, vowing to fight the country’s deflationary recession with increased Bank of Japan monetary easing and fiscal stimulus. The measures, dubbed “Abenomics,” have boosted consumer spending and sent the Topix Index up 39 percent this year as a weakened yen helps exporters.

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