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Japan’s factory output likely slid in December

Japan factory

Industrial output was forecast to have fallen 0.8% in December from the previous month

Japan’s factory output likely slid in December for the first time in three months due to lingering supply bottlenecks, a Reuters poll showed.

Meanwhile, retail sales were seen growing for the third straight month in December, thanks to low COVID-19 cases that encouraged shoppers until the Omicron variant drove up infections to a record high this month.

The world’s third-largest economy likely rebounded solidly in the last quarter of 2021, but whether it can maintain momentum is becoming uncertain as a fresh wave of coronavirus outbreaks again disrupt supply chains and dampens demand.

Industrial output was forecast to have fallen 0.8% in December from the previous month, according to the poll of 19 economists.

That would mark the first decline in three months and follow strong 7.0% growth in November.

Given the shortage in components like semiconductors, carmakers probably couldn’t put in full efforts to make up earlier loss in production, said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

Led by automakers, export-oriented manufacturers have recovered from supply constraints in July-September. But some analysts said the recovery was lukewarm.

Supply chain risks – from the unrelenting chip shortage to workforce disruptions because of COVID-19 infections – suggest there may be downside risks for production in January, said Takeshi Minami, chief economist at Norinchukin Research Institute.

Retail sales were seen rising 2.7% in December from a year earlier, after growing 1.9% in November, as shoppers likely remained sanguine amid low coronavirus cases.

However, domestic COVID-19 cases began rising rapidly earlier this month, and the government has imposed curbs to limit face-to-face services in most areas.

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