Japan’s Jan factory output falls on car production cuts By Reuters

By Daniel Leussink

TOKYO (Reuters) – Japan’s factory output shrank for the second straight month in January as the auto sector grappled with production suspensions due to the coronavirus pandemic and global supply shortages, raising the likelihood of an economic contraction.

Some analysts expect the world’s third-largest economy to slip into contraction in the current quarter due to a worldwide chip shortage and as consumer sentiment suffered from surging Omicron infections.

Retail sales expanded for the fourth consecutive month from a year earlier in January, due in part to a flattered comparison to last year’s low levels.

Factory output fell 1.3% in January from the previous month, official data showed on Monday, hurt by falling production of cars as well as declining iron, steel and non-ferrous metals.

That meant output extended declines to a second month, after slipping 1.0% in December, and came in weaker than a 0.7% loss forecast in a Reuters poll of economists.

Japanese car producers including Toyota Motor (NYSE:) Corp and Suzuki Motor Corp have faced output cuts after being hit by supply chain disruptions and seeing pressure from a record surge in COVID-19 infections at home.

Monday’s data showed output of cars and other motor vehicles slumped 17.2% from the previous month in January, falling for the first time in four months.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to advance 5.7% in February and 0.1% in March.

Separate data showed retail sales were slightly stronger than expected, rising 1.6% in January year-on-year compared to a the median market forecast for a 1.4% rise.

But retail sales dropped a seasonally adjusted 1.9% from the prior month, the second monthly downturn in a sign of the negative impact a surge of coronavirus infections was having on momentum.