Japan: Manufacturing and retail sales strengthened

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Japanese factories increased output at the fastest pace in nine years in June as they eased problems caused by China’s coronavirus restrictions, in a welcome sign for policymakers who hope the economic outlook will improve. .

Separate data showed retail sales rose for a fourth straight month in June, supporting the view that a pick-up in consumption helped the economy return to growth in the second quarter after contracting in the January-March period.

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Factory output rose 8.9% on a seasonally adjusted basis in June from the previous month, marking the biggest monthly rise since 2013 when data began to become available.

The increase is largely attributed to the lifting of strict lockdowns in Shanghai, which has led to a boost in Japanese production of motor vehicles, electrical machinery and electronic components and appliances.

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“A huge 14% rebound in the month-on-month recovery in auto production led the increase as parts shortages stemming from the Shanghai lockdown eased,” Capital Economics economist.

While the increase was more than the 3.7% expected, a government official stressed that the downside risk to production remains as delays in the supply of parts remain.

“The global economy, and manufacturing in particular, is clearly slowing down. But Japanese output has not yet leveled off. Recovery momentum should strengthen further as supply constraints ease,” said an analyst at the Shinkin Central Bank Research Institute.

Separate data showed retail sales came in lower than expected, showing a 1.5% increase in June from a year earlier, versus estimates for 2.8%.

This reinforced the view that private consumption, which accounts for more than half of the economy, remained high in the second quarter.

However, heightened inflationary pressures and a recent spike in coronavirus cases could lead households to cut back on purchases in the coming months, which would be bad for Japan’s economic recovery.

Tokyo core consumer prices rose 2.3% in July from a year earlier, beating the BoJ’s target for a second month.

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

Unemployment stood at 2.6% in June, unchanged from the previous month, while the job availability index stood at 1.27, up slightly from 1.24 in May.

Source: Capital

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