One of China's industrial production - Photo: Privacy

JAKARTA (TheInsiderStories) – China’ industrial production rose only 5.3 percent year-on-year in the February. This was the slowest pace since the same period in 2002 and indicating further weakness in the world’s second largest economy.

This decline did not followed a 5.7 percent increase in the previous period and the market forecast lost 5.5 percent, said an official report today (03/14).

According to the report, the industrial production in China averaged 12.06 percent from 1990 to 2019. China’ industry had recorded the lowest production of all time in the range of -21.10 percent in January 1990. But four years later, in August 1994, China’ industrial production experienced a heyday which reached the highest all-time production record of 29.40 percent.

Reportedly, in January-February, output grew at a softer pace for mining (0.3 percent vs. 3.6 percent in December) and utilities (6.8 percent vs. 9.6 percent). Meanwhile, manufacturing output growth was little changed (5.6 percent vs. 5.5 percent).

Furthermore, the  industrial production in the United States (US) rose 3.8 percent year-on-year in January, following an upwardly revised 4.1 percent increase in December. Manufacturing went up 2.9 percent and mining and quarrying jumped 15.3 percent while utilities slumped 5.6 percent.

American industrial production measures the output of businesses integrated in industrial sector of the economy. Manufacturing is the most important sector and accounts for 78 percent of total production.

The biggest segments within manufacturing are: chemicals (12 percent of total production), food, drink and tobacco (11 percent), machinery (6 percent), fabricated metal products (6 percent), computer and electronic products (6 percent), and motor vehicles and parts (6 percent). While, mining and quarrying account for 11 percent of production and utilities account for the remaining 11 percent.

Industrial production in the US averaged 3.73 percent from 1920 to 2019, reaching an all-time high of 62 percent in July of 1933 and a record low of -33.70 percent in February of 1946.

In Europe zone, the industrial production dropped 1.1 percent from a year earlier in January 2019, easing from a 4.2 percent decline in the previous month, which was the steepest in 9 years, and beating market expectations of a 2.1 percent fall. Output continued to contract for capital, intermediate and durable consumer goods while a rebound was seen in production of both energy and non-durable consumer goods.

Moving to eastern of world, Japan’ private machinery orders drop sharply in January; weak external demand weighs on capital expenditure, according to principal economist at IHS Markit Harumi Taguchi.

According to him, Japan’ personal machine orders are not including volatile – the main indicator of capital expenditure – down 5.4 percent month-on-month (MoM) in January, declining for the third consecutive month.

Meanwhile, orders from producers decreased for the third consecutive month, by 1.9 percent m/m, and orders from non-producers (excluding volatile) fell 8.0 percent MoM, the first decline in four months.

Weaknesses in orders from producers were largely due to declining orders for electrical machinery, electronic information and communication equipment, and automobiles, parts and accessories, which were partially offset by a surge in orders for chemical and chemical products and non-ferrous metals.

Meanwhile, the sharp decline in orders from non-producers largely reflected a decline of 24.9 percent m/m in orders from the transportation sector and postal services, and a decline of 15.2 percent m/m in orders from wholesale and retail trade, following the increase four months in a row.

IHS Markit viewed, while the overall trend in orders from non-producers remains at the same level, orders from several key industries in the manufacturing sector have weakened mainly due to the rapid decline in external demand. This decline is in line with the industry’s weak outlook from a 0.9 percent quarter-on-quarter decline to Q1.

Therefore, IHS suggests that amid uncertainty over the global economy, companies remain cautious about spending on fixed investment, given that the initial fixed investment plan signifies a weak capital expenditure for 2019.

Written by Daniel Deha, Email: daniel@theinsiderstories.com