Production at Japanese factories prolongs decline in auto production cuts

Smoke rises from a factory at sunset in the Keihin Industrial Zone in Kawasaki, Japan, January 16, 2017. REUTERS / Toru Hanai / File Photo

  • August production drops more than expected
  • Automobile production lags
  • Retail sales post first decline in 6 months

TOKYO, Sept.30 (Reuters) – Japan’s industrial production fell for the second consecutive month in August as COVID-19 outbreaks elsewhere in Asia disrupted the supply chains of automakers already facing headwinds from to a prolonged shortage of fleas.

Separate data released Thursday showed retail sales in August fell for the first time in six months as households cut spending amid a coronavirus relapse, signaling lackluster consumer sentiment.

Data suggests the pandemic continued to eat away at the Japanese economy this quarter, posing an immediate challenge to the next prime minister, Fumio Kishida, who won the ruling party’s leadership vote on Wednesday, ahead of the general election due to have held at the end of November.

Factory output fell 3.2% in August from the previous month, according to official data on Thursday, affected by weaker production of cars and electronic machinery and marking the second consecutive month of contraction after falling 1, 5% in July.

The drop was larger than the 0.5% drop predicted in a Reuters poll of economists.

Major Japanese automakers including Toyota Motor Corp (7203.T), Nissan Motor Co (7201.T) and Honda Motor Co (7267.T) have faced production cuts since late August due to a component shortage, which could last until October. the industry lobby warned earlier this month.

On Thursday, Suzuki Motor Corp (7269.T) announced the closure of two assembly plants in Japan for one to three days in October due to a supply shortage.

“Cutbacks in auto production have affected many other related sectors that have to cut supplies when factories are closed,” said Takeshi Minami, chief economist at the Norinchukin Research Institute. “Stopping the recovery from the pandemic is taking longer in Japan than in other countries.”

Builders surveyed by the government expect production to rise 0.2% in September and 6.8% in October, but bolder projections imply “big downside risks” given the uncertainties surrounding cuts in auto production, a government official told reporters.

The government lowered its assessment of industrial production for the first time since April 2020, saying it was “stalling”.

Analysts expect the world’s third-largest economy to grow at an annualized rate of 1.2% this quarter, much slower growth than other advanced economies, as stop-go brakes against coronaviruses hit private consumption .

With August production and consumption worse than expected, “Japan’s gross domestic product from July to September now looks closer to zero growth,” Minami said, adding that weaker results in September could do so. turn red.

Separate government data released on Thursday showed retail sales weaker than expected, down 3.2% in August from a year earlier, dragged down by consumer electronics and apparel .

This marked the first decline in six months and was larger than the median market forecast for a decline of 1.0%.

Worse-than-expected retail sales came after Japan said earlier this week it would lift the brakes on coronaviruses in all regions by Thursday given a sharp drop in COVID-19 cases and that ‘about 60% of the population has been fully immunized.

Retail sales were down 4.1% on a seasonally adjusted basis compared to the previous month.

Reporting by Kantaro Komiya and Yoshifumi Takemoto; Editing by Daniel Leussink and Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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