Japan industrial output rises for second month but retail sales fall again

TOKYO (REUTERS) – Japan’s factory output rose for a second straight month in July, signaling a gradual recovery from the blow delivered by the coronavirus pandemic.

But retail sales fell for a fifth straight month and at a somewhat faster pace, a worrying sign for private consumption, which accounts for more than half of the world’s third-largest economy.

The data on Monday (Aug 31) underscored the fragility of an economy that suffered a record 27.8 per cent contraction in the April-June quarter as the pandemic took a heavy toll on both domestic and external demand.

While analysts believe the economy has bottomed out after lockdowns were lifted in late May, they say any recovery will be modest amid worries about a second wave of infections.

Ministry of Economy, Trade and Industry (METI) data showed Japan’s industrial output grew 8.0 per cent in July from the previous month, versus economists’ median estimate of a 5.8 per cent gain and following a 1.9 per cent increase in June.

It was the second straight month of gains after having hit its lowest level in May since the global financial crisis. But factory activity is still far from pre-pandemic levels.

Manufacturers surveyed by METI expect output to increase 4.0 per cent in August and grow 1.9 per cent in September.

METI raised its assessment on industrial output, saying it was picking up.

Highlighting weak consumer demand, however, retail sales fell 2.8 per cent year-on-year in July, worse than a 1.7 per cent drop seen by economists in a Reuters poll and following a 1.2 per cent drop in June.

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