Japan factory output rises 2% in June as demand buoys manufacturers By Reuters

TOKYO (Reuters) -Japanese factory output improved in June for the first time in two months, government data showed on Monday, highlighting growing confidence among manufacturers buoyed by strong demand.

Many countries, including Japan, are relying on domestic consumption to underpin growth while the risk of global recession persists.

Factory output rose 2.0% in June from a month earlier on a seasonally adjusted basis, lower than the 2.4% median market forecast. That followed a revised 2.2% month-on-month decline in May.

“Production is likely to continue to pick up on the back of resilient domestic demand, particularly for private consumption,” said Taro Saito, executive research fellow at NLI Research Institute.

“However, the pace of recovery is likely to be moderate due to continued sluggish export growth caused by slowdown in overseas economies.”

Production in the auto-related sector, which comprises a large chunk of corporate Japan, rose 6.1%. Sales both at home and abroad were strong, a Ministry of Economy, Trade and Industry (METI) official told a media briefing.

Output of trucks and auto parts, including gear systems for vehicles, also contributed to the upward swing, the official said.

The biggest three automakers by sales in Japan – Toyota Motor (NYSE:), Honda Motor and Nissan (OTC:) Motor – last week reported increased global production in January-June compared with the same period a year earlier, as semiconductor supply eased.

Electronic components and devices output rose 6.8% as shipments of capacitors used in smartphones increased, the METI official said.

METI maintained its assessment of industrial output, saying “production is slowly picking up”.

Manufacturers surveyed by METI expected output to fall 0.2% in July and increase 1.1% in August, the data also showed.

“We’ll continue to monitor the effects of the shortage of parts and materials and the impact of rising prices” in coming months, the METI official said.

Separate data showed retail sales rose 5.9% in June from a year earlier, in line with economist forecasts.

Compared with the previous month, retail sales contracted 0.4% in June, following a 1.4% rise in May, the data showed.