Daily Management Review

Drop In Japan's Factory Output For December More Than Expected


Drop In Japan's Factory Output For December More Than Expected
In December, Japan's manufacturing output fell for the first time in three months, as a drop in machinery production offset a tiny increase in vehicles, casting doubt on the economy's strength.
In December, retail sales increased year over year for the third month in a row, thanks to a drop in coronavirus incidence. Consumer sentiment is predicted to be harmed as a result of the Omicron variant's record infections this month.
Official data released on Monday showed that factory output fell 1.0 per cent in December from the previous month, owing to a drop in output of general-purpose and production apparatus, such as chip-making equipment and manufacturing engines.
This means that output declined for the first time in three months, falling faster than the 0.8 per cent dip predicted in a Reuters survey of experts.
"Output especially fell among capital goods makers, probably due to the strong impact from the chip shortages," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"It suggests its impact is widening even though the focus has been on the car industry."
Automobile manufacturers have been forced to cut production even as demand in major markets like China recovers, and they've also had to fight with growing semiconductor demand from consumer electronics manufacturers.
Due to the chip scarcity, Toyota Motor Co, the world's largest automaker, stated this month that it expects output to fall short of its annual target of 9 million vehicles for the current fiscal year, which runs until the end of March. find out more
Nidec Corp's third-quarter operating profit fell last week as increased material prices and a chip scarcity squeezed margins.
The report indicated that automobile and other vehicle output growth fell to 1.5 per cent in December from the previous month, far lower than the 43.7 per cent increase in November and the 15.9 per cent increase in October.
According to a government official, certain vehicle makers fared better than others in the chip supplier competition.
"Procurement is increasing, but the situation is different from firm to firm," the official said.
The Ministry of Economy, Trade, and Industry (METI) polled manufacturers, who predicted output growth of 5.2 per cent in January and 2.2 per cent in February.
According to the official, the projections do not include output cuts implemented after the survey deadline of January 10th.
According to a Reuters survey released earlier this month, the world's third-largest economy is expected to grow at an annualized rate of 4.5 per cent in the current quarter, but several economists warned that the optimistic forecasts could be premature.
According to Yoshiki Shinke, chief economist of Dai-ichi Life Research Institute, first-quarter growth will be hampered by the spread of the coronavirus and a drop in automobile production.
"There's a possibility growth will be negative in the January-March period, though it will depend on the infection situation," Shinke wrote in a report.
Separate data revealed that retail sales increased 1.4 per cent year over year in December, less than the predicted 2.7 per cent increase.
Sales increased for the third month in a row, boosted by higher demand for general products and food and beverages, albeit year-on-year growth slowed.
In recent weeks, Japan has observed an increase in Covid-19 instances caused by the Omicron strain, causing the government to implement tougher controls that currently encompass 70 per cent of the country.
According to a government survey, a consumer confidence indicator declined 2.4 points in January, to its lowest level since August, indicating that the Omicron variant's record infections were harming morale.