By Satoshi Sugiyama
TOKYO (Reuters) - Japan's factory output took a nosedive last month, driven by typhoon-led disruptions in motor vehicle production and sluggish U.S. sales. The government and analysts are now warning of a subdued outlook, raising concerns for a solid economic recovery.
Industrial output plummeted by 3.3% in August compared to the previous month, according to data released by the Ministry of Economy, Trade and Industry (METI) on Monday. This was significantly worse than the market's expectations of a 0.9% drop.
Experts like Shungo Akimoto, a market economist at Mizuho Securities, are cautious about the future, stating that it is challenging to anticipate a significant production increase in the near term. Motor vehicle production took a major hit, dropping by 10.6% in August due to disruptions caused by Typhoon Shanshan and automaker certification scandals.
Additionally, production machinery, including chip-making machinery, saw a sharp decline of 18.7% month-on-month in August. This was attributed to weaker overseas demand, with exports to Taiwan seeing a significant drop.
While manufacturers are optimistic about a 2.0% increase in output for September and a 6.1% expansion in October, historical data suggests that these forecasts may be overly optimistic. A METI official noted that even if September's output grows as expected, the July-September output would still be lower than the second quarter.
On the retail front, Japanese retail sales saw a 2.8% rise in August compared to a year earlier, surpassing market expectations. This growth follows a 0.8% increase in retail sales in August, indicating a positive trend in consumer spending.
Japan's economy expanded by 2.9% in the second quarter, driven by steady wage hikes and growing capital expenditure. However, soft demand in China and slowing U.S. growth are casting shadows on the country's export-dependent economy.
In conclusion, the recent downturn in Japan's factory output, coupled with positive retail sales, paints a mixed picture for the country's economic recovery. Investors should closely monitor the situation and consider diversifying their portfolios to mitigate risks associated with the volatile market conditions.
