Japan’s factory output drops in July as global slowdown reverberates
JAPAN’S industrial production fell more than expected in July as slowing economic activity in some overseas markets weighed on demand, while retail sales beat estimates.
Factory output declined 2 per cent from June, the industry ministry said on Thursday (Aug 31). Economists had forecast a 1.4 per cent drop. Manufacturing machinery and electronic components were among the biggest drags on overall output, the ministry said.
The weak reading signals external demand that powered Japan’s growth in the second quarter may be ebbing.
In July, Japan’s exports fell for the first time in more than two years, as sharp declines in shipments of chipmaking gear and parts outweighed a jump in demand for cars. Exports to China, Japan’s biggest trading partner, slid by 13.4 per cent, the largest drop since January.
Output is expected to advance in the next two months, with the ministry estimating month-on-month gains of 2.6 per cent and 2.4 per cent in August and September, respectively.
Another report showed that retail sales gained 2.1 per cent in July from June, beating a 0.8 per cent gain forecast by analysts. Sales rose 6.8 per cent from a year earlier, also exceeding estimates.
The economy needs strong external demand in order to power its post-pandemic recovery, as domestic consumption remains patchy with inflation outpacing wage growth.
Japan is feeling the impact from China’s economic slowdown and the risk of deflation there, combined with ongoing monetary policy tightening in the US and Europe as authorities in those regions battle rising prices. BLOOMBERG
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