Spoiled for choice, but I return today to Japan's machinery industry. Yesterday's Japanese wholesale and retail sales numbers posed a real question. Retail sales of machinery were up 17.2% yoy; wholesale sales of the same were up 36.8% yoy, with industrial equipt up 82.1% and electrical equipt up 26.1%. Is this a signal of a major upturn in capital goods demand, or are Japan's machinery makes simply stuffing the distribution channels?
It's an important question, given that Japan is one of the world's biggest capital goods suppliers.
Today we had September's industrial production numbers, which showed output up 4% mom sa and down 9% yoy, but with a monthly movt which was 2.4SDs above historic seasonal trends. Within that, production machinery was up 11.1% mom, shipments were up 11.8% , inventories up 1.5% and the inventory/shipment ratio down 11%. That inventory/shipment ratio was the lowest since February, but also still 19% higher than last year's average. So although September showed dramatic progress, it was from a poor starting position. Still, on the face of it, it isn't channel stuffing which is driving production, or wholesale sales for that matter. It's demand.
