Japan’s July Industrial Output Likely to Fall

July’s factory output in Japan likely fell as export demand for capital goods stagnated during the month, a poll showed on friday. Moreover, supply chains were disrupted by the surge of the Delta variant of the coronavirus in Asia.

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

From the previous month in the poll of 18 economists, industrial output was projected to have fallen 2.5%. It dropped into contraction following a steep 6.5% rise in June. That was its  highest growth since July 2020.

According to analysts at SMBC Nikko Securities, the expected output drop can be attributed to weak Asia-bound machinery exports. A recovery in car production was likely to offset some of the decline, the analysts added.

Also in the poll, retail sales are estimated to grow 2.1%  from the same month a year ago, accelerating  after a 0.1% rise in June.

Pressure from the health crisis, however, was likely to pull back consumption trends. The year-on-year (YoY) result is expected to be skewed due to statistical base effects reflecting the decline in 2020. 

Release Dates of Reports

Also in the poll on friday, Japan’s jobs-to-applicants ratio was estimated to slide to 1.12 from 1.13 in June. Its unemployment rate in July was predicted to hold steady at 2.9%. 

At 8:30 a.m. on Aug. 31 (2330 GMT Aug. 30), Job data will be printed out by the labour ministry, while data on Housing will be out at 2 p.m. on Aug. 31 (0500 GMT).

At 8:50 a.m. Aug. 30 (2350 GMT Aug. 29) the Ministry of Economy, Trade and Industry will release retail sales data.  At the same time on Aug 31  (2350 GMT Aug. 30), it will publish the country’s factory output. 

Takeshi Minami, chief economist at Norinchukin Research Institute said that  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.

 On the Covid-19 front, new cases in Japan surged to more than 25,000 a day this month driven by the delta variant. 

According to data from the country’s Fire and Disaster Management Agency,  the number of medical emergencies nationwide that required an ambulance dispatch rose for six straight weeks to a historic high.  These emergencies had difficulty finding a hospital that will accept the patient.