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Japan’s factory output contracted for the first time in three months in December as a decline in machinery production outweighed a small rise in auto production, overshadowing the strength of the economic recovery.

Retail sales posted their third straight month of year-on-year gains in December as low coronavirus cases encouraged shoppers. However, record infections this month fueled by the Omicron variant are expected to have hit consumer confidence.

Factory output fell 1.0 percent in December from the previous month, official data showed on Monday, driven by a decline in production of general-purpose and production machinery, including chip-making equipment and motors. used in manufacturing.

That meant output, which fell faster than the 0.8 percent forecast in a Reuters survey of economists, fell for the first time in three months.

“Output fell especially among capital goods makers, probably due to the strong impact of the chip shortage,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.

“It suggests its impact is widening even though attention has been focused on the car industry.”

Automakers have been forced to curb production even as demand in key markets such as China recovers, while they have also grappled with surging demand for semiconductors at consumer electronics firms.

Toyota Motor Co (7203.T), the world’s biggest car seller, said this month it expected production to fall short of the annual target of 9 million vehicles for its current business year that runs through the end of March due to the chip resistance. shortage. read more

Last week, engine maker Nidec Corp’s (6594.T) third-quarter operating profit fell as rising materials prices and semiconductor shortages squeezed margins. read more

The data showed auto and other vehicle production growth slowed to 1.5 percent from a month earlier in December, much weaker than November’s 43.7 percent rise and a jump of 15, 9 percent in October.

Some auto companies have weathered the competition for chip supplies better than others, a government official said.

“Acquisitions are increasing, but the situation is different from company to company,” the official said.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to grow 5.2 percent in January and 2.2 percent in February.

The forecasts did not include production cuts made after the survey’s January 10 deadline, the official said.

OUTLOOK RISKS

The world’s third-largest economy is projected to expand by an annualized 4.5 percent in the current quarter, a Reuters poll showed this month, but some economists warned of downside risks to the optimistic projections. read more

First-quarter growth faces a hit to private spending from the spread of the coronavirus and declining auto production, said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute.

“There is a possibility that growth will be negative in the January-March period, although it will depend on the infection situation,” Shinke wrote in a report.

Separate data showed retail sales rose 1.4 percent in December from a year earlier, less than the expected 2.7 percent rise.

That marked the third straight month of rising sales, which were boosted by higher demand for general merchandise and food and beverage, though year-over-year growth slowed.

Japan has seen a spike in COVID-19 cases caused by the Omicron variant in recent weeks, forcing the government to implement tighter restrictions that now cover 70 percent of the country. read more

An index measuring consumer confidence fell 2.4 points in January to its lowest level since August, a government survey showed, in a sign that record infections due to the Omicron variant were weighing on confidence. read more

https://www.reuters.com/markets/europe/japans-dec-factory-output-falls-faster-than-expected-2022-01-31/

Category: Japan


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