Japan December factory output, retails sales seen falling in blow to GDP outlook: Reuters poll

Japan’s industrial production likely declined again in December and retail sales are also expected to have slipped, a Reuters poll found, reinforcing worries a recent sharp increase in COVID-19 cases could derail a fragile economic recovery. The world’s third-largest economy has rebounded from its biggest postwar slump last year, but a resurgence in local and overseas coronavirus infections is raising the prospect of a prolonged period of subpar growth.

The nation’s factory output is expected to have declined 1.5% in December from the previous month, the poll of 18 economists showed on Friday, deepening from a 0.5% fall in November. “Production recovery in transport machinery has come to a pause, which affected the overall factory output,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “There is a chance that rapid recovery in the production on a monthly basis may have ended.”

Factory output had risen between June and October, recovering from the pandemic-hit declines earlier last year, support by global demand for autos and IT related goods. Japan renewed the state of emergency in Tokyo and some other areas earlier this month to curb the virus infections, which analysts say could hurt businesses, especially the service sector. Retail sales, a key gauge of consumer spending, likely slipped 0.4 % in December, down for the first time in three months, the poll found. Sales of autos, home electric appliances, food and beverages were firm but other products such as clothes fell as people refrained from going out due to the pandemic, analysts said.

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

Japan December factory output, retails sales seen falling in blow to GDP outlook: Reuters poll, Reuters, Jan 22