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Dec output -0.1% m/m vs forecast -1.2%
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Oct-Dec output -3.1% q/q, biggest fall since 2020Q2
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Manufacturers see Jan output flat, Feb +4.1%
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Dec retail sales +3.8% y/y vs f'cast +3.0%
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Jobless rate, jobs/applicants ratio flat in Dec
(Adds graphics, no change to text)
By Kantaro Komiya
TOKYO, Jan 31 (Reuters) - Japanese factories cut output
slightly in December, capping the worst quarter for
manufacturers since the onset of the COVID-19 pandemic, hit by
stalling global demand and rising costs.
Although retail sales, a barometer of service-sector
activity and consumer spending, rose more than expected, the
faltering factory activity is ill-timed as companies face calls
to hike wages to sustain Japan's post-pandemic recovery.
"Japan is nearing a recession if you look only at
manufacturers, but solid non-manufacturers are underpinning the
overall economy," said Takumi Tsunoda, senior economist at
Shinkin Central Bank Research Institute.
Industrial output fell 0.1% in December from the previous
month, government data showed on Tuesday. The drop was less than
the median market forecast for a 1.2% decrease and followed
upwardly-revised 0.2% growth in November.
Outputs of items related to capital expenditure such as
general machinery and metal products, which dropped 6.0% and
3.0%, respectively, dragged down the overall December index.
Output of auto products was up 0.6%, posting first growth in two
months.
Compared with the previous quarter, factory output fell 3.1%
in October-December, the first drop in two quarters. The fall
was biggest since April-June 2020's 16.8% decline, when the
impact of the pandemic first fully hit the world's third-largest
economy.
Manufacturers surveyed by the Ministry of Economy, Trade and
Industry (METI) expect output to remain flat in January and
increase 4.1% in February, the data also showed, although the
official poll tends to report an optimistic outlook.
Separate data showed on Tuesday Japanese retail sales rose
3.8% in December from a year earlier, beating a median market
forecast for a 3.0% gain and its tenth straight month of
expansion.
Japan is set to downgrade its disease classification of
COVID-19 to a lower level equivalent to the seasonal flu in May,
Prime Minister Fumio Kishida said on Friday, raising hopes for
further economic normalisation coupled with a tourism reopening.
The jobless rate stayed unchanged at 2.5% in December,
another official data showed. Jobs-to-applicants ratio, a gauge
of job availability, was also flat from the previous month that
posted the highest reading since March 2020.
With a tightening labour market, 41-year-high consumer
inflation and policymakers' pleas, more than half of big
Japanese companies are planning to raise wages this year, a
Reuters survey showed this month.
Yet the small companies that provide most of Japan's jobs
are struggling to increase pay, testing the Bank of Japan's rosy
picture of sustainable economic growth in tandem with wage
hikes.
"Rising raw material costs are increasingly tormenting small
companies, who are willing to raise workers' wages but must be
realistic about their bottom line amid a cost squeeze," said
Shinkin's Tsunoda.
"Pay hikes won't prevail outside of big firms, so the
monetary policy should stay easy."
Japan's economy, after a surprise contraction in
July-September, is expected to have expanded by an 3.0%
annualised growth in October-December thanks to solid
consumption, according to the latest Reuters poll.
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Factory output drops slightly ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Kantaro Komiya; Graphics by Pasit
Kongkunakornkul; Editing by Kim Coghill)
