Japan’s July factory output to fall as Delta variant spreads in Asia: Reuters poll

FAN Editor
A man works at a factory at the Keihin industrial zone in Kawasaki
FILE PHOTO: A man works at a factory at the Keihin industrial zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato

August 27, 2021

By Kantaro Komiya

TOKYO (Reuters) – Japan’s industrial output likely fell in July as export demand for capital goods stagnated and supply chains were further disrupted by the spread of the Delta coronavirus variant in Asia, a Reuters poll showed on Friday.

The poll also showed retail sales, a key barometer of consumer spending, were expected to post a fifth straight month of year-on-year gains in July, helped by growing demand for electronics and clothing.

Factory output was projected to have fallen 2.5% from the previous month in the poll of 18 economists, dropping into contraction after a sharp 6.5% jump in June, the highest growth since July 2020.

“With the chip shortage issue, the global spread of the Delta variant and particularly its impact on parts supply from Southeast Asia puts pressure on production” by Japanese manufacturers, said Takeshi Minami, chief economist at Norinchukin Research Institute.

Analysts at SMBC Nikko Securities attributed the expected output drop to weak Asia-bound machinery exports, while adding that a recovery in car production was likely to offset some of the decline.

For retail sales, analysts in the poll forecast growth of 2.1% from the same month a year earlier, picking up speed after a 0.1% increase in June.

But pressure from the health crisis was likely to remain a drag on consumption trends, with the year-on-year figure expected to be skewed due to statistical base effects reflecting last year’s slide.

The Ministry of Economy, Trade and Industry will publish retail sales data at 8:50 a.m. Aug. 30 (2350 GMT Aug. 29) and factory output at 8:50 a.m. Aug. 31 (2350 GMT Aug. 30).

The country’s unemployment rate in July was expected to hold steady at 2.9% in the Friday poll. The jobs-to-applicants ratio, a measure of jobs’ availability, was forecast to fall to 1.12 from 1.13 in June.

Job figures will be released by the labour ministry at 8:30 a.m. Aug. 31 (2330 GMT Aug. 30) and housing starts data will be issued at 2 p.m. Aug. 31 (0500 GMT).

(Reporting by Kantaro Komiya; Editing by Kim Coghill)

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