Japan's industrial output flat in July

In a further sign that Asia's industrial machine is facing a slowdown, Japan has just reported flat industrial output for July. Excerpt:

Japan's industrial output in July was unchanged from June, falling below market expectations, and raising concerns that the country's economic recovery may be topping out, economists said... Data released by the the Ministry of Economy, Trade and Industry showed that output in July was pressured by a slowdown in production of electronic parts. Economists had expected production to grow 1.0 percent month-on-month, after June's decline of 1.3 percent...

Economists said output, which has been expanding since early 2002, is leveling off partly because manufacturers of electronics parts and devices are curbing production to reduce inventories. The ministry data released Tuesday showed inventories dropped 2.0 percent in July from June while shipments expanded by 0.4 percent...

Daiwa Institute of Research economist Junichi Makino said as a result of industry drawdowns, liquid crystal display (LCD) panel makers "have already passed through the worst phase of inventory adjustment and the overall production environment is expected to improve gradually." At the same time however, Makino cautioned that the environment for the broader technology sector could deteriorate further, led by semiconductor processing equipment makers and chipmakers.

Of late, economists appear to be making a habit of being disappointed. The slowdown is real and economists should adjust their expectations more quickly. In my opinion, the only question is whether the slowdown will continue or whether economic growth will stabilise in the near future.