Home Trade industry Japanese factory output in April slumps in sign of pressure on economy

Japanese factory output in April slumps in sign of pressure on economy

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A worker rides a bicycle near a factory at the Keihin Industrial Zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato

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  • April production fell 1.3% m/m, much weaker than expected
  • Manufacturers see production increase in May and June
  • Retail sales rise more than expected in April

TOKYO, May 31 (Reuters) – Japanese factories recorded a sharp drop in output in April as COVID-19 lockdowns in China and wider supply disruptions weighed heavily on manufacturers, darkening the outlook for trade-dependent economy.

Separate data showed retail sales recorded the strongest rise in nearly a year as consumers ramped up spending after the government eased pandemic measures, resisting pressure from price hikes. wider prices that threaten to hurt demand.

Factory output fell 1.3% in April from the previous month, official data showed on Tuesday, on sharp declines in output of items such as electronic parts and production machinery.

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It was the first drop in three months and much smaller than the 0.2% decline economists expected in a Reuters poll.

The data comes a day after Toyota Motor Corp (7203.T) missed its global production target for April as output fell more than 9% year-on-year as lockdowns in China exacerbated a shortage of parts. Read more

The world’s largest automaker by sales had already cut its global production plan for June on Friday and signaled the possibility of lowering its annual production plan by 9.7 million vehicles. Read more

“Japanese production is expected to continue to stagnate in the near term as global supply chain disruptions continue,” said Kazuma Kishikawa, an economist at the Daiwa Institute of Research.

A full resumption of freight transport from China would likely take time even after Shanghai ends its strict COVID-19 lockdown from Wednesday, Kishikawa said, adding that it would likely weigh on Japanese production.

“Logistics will not be restored overnight,” he added.

As activity in Japan’s service sector recovers as the pandemic subsides, the country’s manufacturing sector has come under pressure from supply disruptions and war-induced rising material prices. from Russia to Ukraine.

RECOVERY OF SERVICES?

Shortages of high-tech chips and parts could hurt consumption and exports of durable goods such as cars due to production disruptions, said Takeshi Minami, chief economist at the Norinchukin Research Institute.

“But services spending is expected to overshadow that, so growth will likely be positive in the second quarter,” Minami said.

He thinks a technical recession, defined as two consecutive quarters of economic contraction, is unlikely.

Analysts expect gross domestic product (GDP) to rise an annualized 4.5% this quarter, with the majority seeing a recovery to pre-pandemic levels, according to a Reuters poll conducted in may. This would follow the decline seen in the first quarter. Read more

“Weak April activity data suggests that the Q2 rebound could disappoint, although it should be noted that it tells us nothing about the recovery of the services sector,” wrote Tom Learmouth, Japanese economist at Capital Economics, in a note.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected production to return to growth in May, gaining 4.8%, followed by an 8. 9% in June.

Learmouth said while such forecasts pointed to a strong rebound this quarter, companies’ production plans were “overly optimistic” even with supply shortages suggesting a decline.

Separate data showed retail sales rose 2.9% in April from a year earlier, marking their biggest gain since May 2021. That was bigger than the market’s median forecast for a rise. by 2.6%.

The government also said an index of consumer confidence rose in May for the second consecutive month, while the unemployment rate edged down to a more than two-year low of 2.5% in April, versus 2.6% the previous month.

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Reporting by Daniel Leussink and Kantaro Komiya; Additional reporting by Yoshifumi Takemoto; Editing by Sam Holmes

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