Market Outlook - BNP PARIBAS - Investment Services India

Key Data PreviewChart 13: Japanese Unemployment Rate (% sa)6.05.55.04.54.03.500 01 02 03 04 05 06 07 08 09 10 11Sources: MIC, BNP parobas% sa Sep (f) Aug Jul JunUnemployment rate 4.4 4.3 4.7 4.6Key Point:We expect the jobless rate will deteriorate slightly to4.4% in September owing to fallout from the slowingglobal economy and a statistical reaction to August’sbig improvement.BNP Paribas Forecast: Higher Jobless RateJapan: Unemployment rate (September)Release Date: Friday 28 OctoberWe expect the jobless rate will deteriorate slightly to 4.4% inSeptember. In August, the unemployment rate improved bythe largest margin ever, falling 0.4 pct point to 4.3%. But withthe jobless ranks and employed total both dropping sharply inAugust, the improvement in the jobless rate is said to largelyreflect a plunge in the labour force itself, as immigrationstatistics show foreign labourers (largely second or thirdgenerationJapanese from Latin America) have left Japan indroves after losing their jobs in the wake of the 11 Marchearthquake. It isn’t enough to suggest employment conditionsimproved to the point of reducing the jobless rate, though thejob offer ratio rose. In September, we expect the jobless ratewill resume its deterioration because of fallout from theslowing global economy and a statistical reaction to the bigimprovement in August. Even so, deterioration will be limitedbecause the graying of society continues to steadily reducethe labour force as retirees and those not looking for workenter the non-labour force.Chart 14: Japanese Production and Exports120(2005=100, seasonally adjusted)150115140110Production1301051201001109510090859080Exports (RHS)8075707060655000 01 02 03 04 05 06 07 08 09 10 11Sources: METI. MOF, BNP ParibasSep (f) Aug Jul Jun% m/m -2.0 0.6 0.4 3.8BNP Paribas Forecast: First Decline in Six MonthsJapan: Industrial Production (September)Release Date: Friday 28 OctoberWe expect industrial production in September to fall by 2.0%m/m, marking the first setback in six months. Productionlevels in July have largely returned to normal (i.e., predisasterlevel of February), but if distortions in the seasonaladjustments are excluded, the pace of production growth hasbeen moderating of late. On this score, the productionforecast index also projects a pause in the recovery inSeptember (–2.5%) followed by resumed growth (3.8%) inOctober. While factory activity continues to be underpinnedby reconstruction and ramped-up production by car makers(making up for lost production after the disaster), the outlookis not entirely bright, as downside risks for the globaleconomy have increased, with both developed and emergingeconomies losing momentum. We expect slowing exports tocause factory recovery to stall around year-end.Key Point:Output should decline in September and then resumerecovery on reconstruction demand and catch-upproduction by carmakers. But the slowing globaleconomy will be likely to cause the factory recovery tostall around year-end.Market Economics 20 October 2011Market Mover62www.GlobalMarkets.bnpparibas.com