Japan December Factory Output, Retails Sales Seen Falling

Japan’s industrial production likely dropped again in December and retail sales also expected to have slipped, reinforcing concerns. Worries that a recent sharp increase in COVID-19 cases could derail a fragile economic recovery.

The country has rebounded from its biggest post war slump last year. However, a resurgence in local and overseas coronavirus infections raises the prospect of a prolonged period of subpar growth.

From the previous month, the nation’s factory output is expected to have fallen1.5% in December. On Friday, the poll of 18 economists showed a deepening from a 0.5% fall in November.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute said production recovery in transport machinery has come to a pause. It affected the overall factory output. 

He said, there is a chance that rapid recovery in the production on a monthly basis may have ended.

Factory output was recovering from the pandemic-hit declines last year, helped by global demand for autos and IT-related goods. Output had risen between June and October.

The world’s third-largest economy renewed the state of emergency in Tokyo and other areas this month to curb the virus infections. Analysts say this could hurt businesses, especially the service sector.

Retail Sales

A key gauge of consumer spending, which is Retail Sales, likely slipped 0.4 % in December. It was down for the first time in three months, according to a poll.

Auto sales, sales of home electric appliances, food and beverages were firm. Other products, however, such as clothes declined as people refrained from going out due to the pandemic.

At 8:50 a.m. on Thursday (2350 GMT Wednesday), the trade ministry will publish retail sales data. Moreover, factory output data will be out on Friday.

The jobless rate due on Friday is likely to have risen 3.0% in December. That gain was from 2.9% in November. The jobs-to-applicants ratio, a gauge of the availability of jobs, was likely steady at 1.06.

According to analysts, the fresh emergency measures could worsen unemployment in Japan. 

Tokyo’s core consumer price (CPI) index includes oil products but excludes fresh food prices. CPI fell 0.6% in January from a year earlier, a slower pace of decline from 0.9% in December. Furthermore, nationwide core CPI data out on Friday showed Japan was facing intensifying deflationary pressures.

Elsewhere, in other economic news, Australia’s trade fight with China cost it about $3 billion in commodities sales last year. This shows that the relatively small impact suggests there’s little economic need for Australia to bow to Beijing’s pressure.