frameworkContact

A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

All Reports

 
Aug 18 2016

Cyclical Prospects for Japanese Manufacturing

After Prime Minister Shinzo Abe’s landslide victory in parliamentary elections, people are becoming more optimistic about Japan’s economy. However, recent data for the manufacturing sector raises concerns. Under the circumstances, we closely monitor the Japanese Leading Manufacturing and Leading Exports Indexes, designed to anticipate cyclical turning points in manufacturing activity and exports, respectively. Of course, beyond the cyclical outlook, simple math shows that longer-term trend growth is approaching zero.

Regarding the cyclical outlook, year-over-year (yoy) growth in sales dropped to a six-and-a-half-year low, leaving aside the March 2015 plunge related to the sales tax hike, while GDP hardly grew in the second quarter. In the meantime, with the level of exports plummeting — contracting almost 20% from its January 2015 high to July 2016 — it is no surprise that yoy industrial production growth has stayed in negative territory almost continuously since the second half of 2014 (chart).

This is happening to Japan amid an ongoing global industrial growth downturn that we warned about early this year (ICO Essentials, February 2016). The latest updates to ECRI’s Japanese leading indexes provide critical information for the future cyclical direction of industrial growth.

Full Report: August 10, 2016: International Focus

Related News & Events

Stagflation Lite Getting Harder to Ignore

ECRI July 27, 2016

ECRI’s U.S. Coincident Index growth has been in a clear downtrend since the beginning of 2015. More

 

ECRI’s Simple Math Goes Global

ECRI July 20, 2016

Weak demographics and productivity growth plague the G7, lowering trend economic growth, which makes cyclical slowdowns more risky. More

 

Interview: Cyclical Outlook vs. Structural Problems

Bloomberg July 13, 2016

Just because a U.S. recession isn’t right at hand, doesn’t mean it’s off the table. More

 

Related Reports