Japan factories continue to ramp up output

Japan’s industrial output rose for a second straight month. The reason for it is increasing motor vehicle production in Japan. All this indicates a good start to the third quarter for factories and growth of economic activity in the country.

According to other reports, retail sales increased for the fifth consecutive month. This fact bolstered hopes that the third-largest economy in the world would not be affected by consumer spending remaining flat in the current quarter. 

Official data released on Wednesday revealed that industrial output was up a seasonally adjusted 1 percent in July from the previous month, registering a near double-digit increase. 

A rebound in car production, led by the manufacturing of passenger cars, trucks, and general-purpose machinery, contributed to the rise in factory output. At the same time, according to a Reuters poll, economists had projected a 0.5 percent drop in car production. 

Production of electronic parts and devices saw an output decline of 9.2 percent, marking the largest one-month drop since February 2013. Such a sharp drop was seen mostly due to the memory chips supply reduction. 

It became known after the representatives of Japan's leading car manufacturer, Toyota Motor Corp, said on Tuesday that the output fell 8.6 percent in July 2021. The number of cars produced by the company was below the target for the fourth straight month. 

According to a survey by the Ministry of Economy, Trade and Industry (METI), manufacturers expected output to gain another 5.5% in August and 0.8% in September. 

Darren Tay, Japan economist at Capital Economics, stated that companies tend to make overly optimistic forecasts. According to him, output will remain flat in September after recording growth in August. He said that the output contraction is also likely. 

According to separate data, retail sales were up 2.4% from July 2021. Although retail sales saw growth for five consecutive months, the results surpassed analysts' expectations. An increase in sales of medicine and toiletries as well as general merchandise influenced the retail sales value.  

The real growth was 1.9% compared to the median forecast found in the Reuters survey.