Japanese factory output increases as China eases COVID restrictions

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A worker rides a bicycle near a factory at the Keihin Industrial Zone in Kawasaki, Japan February 28, 2017. REUTERS/Issei Kato

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  • June production increases 8.9%, stronger than expected
  • Automotive production up 14.0% m/m in June
  • Manufacturers see production increase in July and August
  • Retail sales rise year-on-year for 4th consecutive month

TOKYO, July 29 (Reuters) – Japanese factories increased output at the fastest pace in more than nine years in June as disruptions from China’s COVID-19 restrictions eased, a welcome sign for policymakers who hope the economic outlook will improve.

Separate data showed retail sales rose for the fourth consecutive month in June, confirming the idea that rising consumption helped the economy return to growth in the second quarter after contracting in January. -march.

Factory output jumped 8.9% in June, seasonally adjusted, from the previous month, posting the biggest one-month rise since comparable data became available in February 2013, data showed on Friday. official.

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The advance was largely due to the lifting of a strict COVID lockdown in Shanghai, which gave a tailwind to Japanese production of motor vehicles, electrical machinery and electronic parts and appliances.

“A huge 14.0% month-on-month rebound in auto production drove the increase as parts shortages resulting from the Shanghai lockdown eased,” said Marcel Thieliant, senior Japanese economist. at Capital Economics.

While the advance was larger than a 3.7% gain expected by economists in a Reuters poll, a government official said downside risks to production remained as parts supply delays persisted.

The data comes a day after Toyota Motor Corp (7203.T) said it produced 793,378 vehicles globally in June, slightly above a target it had twice cut and capped a quarter that has saw the company pull back 9.8% from its production plan.

The world’s largest automaker by sales has struggled to meet global production targets in recent months due to chip shortages and disruptions caused by lockdowns in China. Read more

“The global economy and particularly manufacturing is clearly slowing down. But Japanese output has not yet normalized,” said Takumi Tsunoda, senior economist at the Shinkin Central Bank Research Institute.

“Its recovery momentum needs to go further as supply constraints ease.”

The government updated its assessment of industrial production, saying it was going back and forth.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected production to extend its recovery by 3.8% in July and 6.0% in August.

RISING PRICE

Separate data showed retail sales were weaker than expected, rising 1.5% in June from a year earlier, against a median forecast for a 2.8% gain in a Reuters poll.

This lent weight to the view that private consumption, which accounts for more than half of the economy, held up in the second quarter.

Growing inflationary pressures and a recent spike in COVID-19 infections, however, could lead households to tighten the purse strings in the coming months, according to Tsunoda. This would be bad news for Japan’s economic recovery.

Tokyo’s core consumer prices, which exclude volatile fresh produce but include energy costs, rose 2.3% in July from a year earlier, beating the inflation target of the Bank of Japan for a second month.

“Prices are expected to continue to rise over the summer months, which will likely be a factor weighing on consumer sentiment,” Tsunoda said.

The unemployment rate, meanwhile, stood at 2.6% in June, unchanged from the previous month, while an index measuring the availability of jobs was 1.27 in June, slightly higher. to 1.24 in May.

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Reporting by Daniel Leussink; Editing by Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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