Japan's industrial output surprises with fall


Japanese industrial output sank for the second straight month

Staff and wires

TOKYO, Japan -- Japanese industrial output dipped 0.4 percent for the month of July, the country's Ministry of Economy announced on Friday.

The shock fall suggests that the rebound in Japan's manufacturing sector is starting to slow down.

Economists had expected a rise of around 0.8 percent, after industrial production slid 0.2 percent in June.

The ministry maintained that the trend for output was on the rise, albeit slowly, but added that future output needs to be closely monitored, because the level of demand is unsure.

Year-on-year growth up

Despite the fall in month-on-month output, production was 3.3 percent higher from the previous year, the first time it had grown on that basis since February 2001.

That shows Japan's industrial base has enjoyed a recovery from its slump. But the extent of the rebound is still at doubt.

The ministry forecast output to rise by 4.5 percent sequentially in August, but that in turn would be followed by a 2.5 percent drop.

If output follows the ministry's projections, the pace of industrial growth in the third quarter will be slower than in the second quarter.

Output in the June quarter was up 3.8 percent from the first quarter due to manufacturers filling export orders for IT-related products from the United States and Asia.

GDP, jobless, retail numbers also released

On the same data-heavy day, the government released data on GDP, retail sales and its jobless rate.

Japan's jobless rate is at 5.4 percent, only slightly off the record high of 5.5 percent in December. (full story)

Although the rate isn't slowing, there is cause for concern because it hasn't shown much improvement over the last three months – and economists warn that with such a high level of unemployment, any recovery for the Japanese economy is likely to be tentative.

However, there was good news on the GDP front, as a surge in exports and demand fueling 0.5 percent growth in GDP for the June quarter.

That was the first time GDP has registered a rise in five quarters, after a revision recast the first quarter's initial strong gain as a slight decline. (full story)

Retail sales 'appalling'

Unlike GDP, Japan's retail sales couldn't break its string of declines, falling 5.3 percent for July, the 16th straight month sales have dropped.

J.P. Morgan economist Ryo Hino called the figures "appalling," though technical factors should produce a rise in August.

"Total retail sales continue to trend down, which is not a good sign for consumer demand," Hino said.