Japanese factory output unexpectedly slumped in May following the flying costs of inputs in the market today.
The government updated a 5.9% month-on-month drop in May, dismaying spectators. The average consensus gave a 2.4% decline forecast for the month.
The actual figures also failed to extend the 2.9% jump recorded in April, amid the recovery in international orders.
Analysts noted that the recent drop came largely from the decline in machinery and car production.
Both are hit by the rising costs of raw materials in the market today. The same trend had been identified in its neighboring country, China, as well.
Another risk that weighed on production capacity is the global shortage of computer chips. This is due to the extensive demand for semiconductor as the world continues to shift towards greater digitization.
In a more detailed look, motor vehicle production for the month stalled at 19.4% amid issues on parts.
For the record, the car industry is a huge driver of cash into the Japanese economy. With this, any decline in the sector will have a significant impact on the overall picture.
Analysts already advanced that the world’s third-largest economy will expand at a more conservative rate than initially predicted.
Consumer spending remains on a tight line, as the state of emergency continues to restrict some of Japan’s important prefectures.
The capital city Tokyo is still in a quasi-restriction, just a few weeks ahead of the Tokyo Olympics happening mid this month.
With the services sector still subdued by the curbs, the country’s economists noted that the recovery trajectory will be difficult in the second half of 2021.
Japan’s Consumer Confidence Hikes
Despite the still-fragile economic recovery, Japan’s consumer confidence index unexpectedly hiked in June.
In data released by the Cabinet Office, the measure showed a reading of 37.4 last month. This is a considerable improvement from the 34.1 reading expected by analysts for the same period.
Economists noted that the government’s vaccination program helped lift citizens’ sentiment.
Currently, Japan had already managed to inoculate more than 11% of its total population, or 14.6 million citizens now fully vaccinated.
The government swiftly distributed 43 million doses of vaccines so far, and this is expected to grow exponentially in the coming weeks.
On the other hand, it still lags behind its developed nations counterpart. The United States is already close to hitting a 50% full vaccination rate as of late.