TOKYO, Sept 30 — Japan’s industrial output shrank more than expected in August in the latest warning that the economy and its manufacturers are facing intensifying pressure amid a bitter Sino-US trade war.
Retail sales, however, expanded at a faster-than-expected pace, signalling strength in private spending ahead of October’s nationwide sales tax increase.
Industrial output fell 1.2 per cent in August, government data showed, dropping at a faster pace than a median market forecast for a 0.5 per cent decline and almost completely reversing July’s 1.3 per cent increase.
Output was weighed down by reduced production of iron and steel products, factory production equipment and cars, offsetting a gain in electronic parts and chemicals, the data showed.
Manufacturers surveyed by the trade ministry expect output to rise 1.9 per cent in September, but fall 0.5 per cent in October.
Today's output data paints a bleak picture for Japan’s export-reliant economy, underlining broadening stress across the manufacturing sector from slowing global growth, though service-sector activity remains firm as it is less at risk from weakness in global trade.
The ministry cut its assessment of activity on the whole, saying it has been somewhat weakening recently.
The world’s third-largest economy has so far avoided buckling under a slowdown in overseas demand, growing for the third straight quarter in April-June, largely thanks to robust household consumption and public works spending.
Japanese Prime Minister Shinzo Abe has also brought Japanese exporters some relief after signing a limited trade deal with US President Donald Trump to cut tariffs on US farm goods, Japanese machine tools and other products.
Although the agreement does not cover autos, Abe said he had received assurances from Trump that Washington would not impose previously threatened “Section 232” national security tariffs on Japanese car imports.
Still, even as the threat of higher US tariffs on Japanese car imports was staved off, policymakers remain worried about the darkening outlook for the economy in light of frail external demand and global recession risks.
Separate data today showed domestic demand might be stronger than thought as retail sales climbed 2 per cent in August from a year earlier, reflecting robust spending ahead of a sales tax hike to 10 per cent from 8 per cent on October 1. The reading was better than a median estimate for a 0.9 per cent gain. — Reuters
