Japan July factory output seen rising but capped by slowing exports, flooding: Reuters poll

By Kaori Kaneko

TOKYO (Reuters) – Japan’s factory output was expected to have risen in July, the first growth in three months, although gains were seen to be limited by slowing exports and flooding that disrupted production, a Reuters poll found on Friday.

Industrial production was expected to have risen 0.2 percent in July from the previous month after falling 1.8 percent in June and 0.2 percent in May, the poll of 17 economists found.

“Factory output has been leveling off this year. Slow growth in exports is one factor behind this,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Taking into account the floods in western Japan early in July, an expected rebound in factory output will probably be limited.”

Output of production machinery, chemicals, petroleum products and electronic parts were among categories that supported production in July, poll respondents said.

July’s record rains and flooding in western Japan killed more than 200 people, the worst such disaster in 36 years, and many companies including carmakers had to temporarily stop production.

The trade ministry will announce the factory output data at 8:50 a.m. on Friday Aug. 31, Japan time (2350 GMT Aug. 30).

Retail sales figures due on Thursday were expected to show a 1.2 percent rise in July from a year earlier following a 1.7 percent increase in June, the poll showed.

“Sales of seasonal items such as cold drinks and air conditioners were solid, and rising gasoline prices likely boosted the value of fuel sales,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

“Consumer spending is on a gradual pickup as wage recovery is spreading to small and medium-sized companies. A labor shortage is unlikely to be easily solved so companies are expected to have to raise wages to hire people.”

The poll found the unemployment rate was seen steady at 2.4 percent in July while the jobs-to-applicants ratio was expected to be 1.62 jobs per applicant in July.

Data next week also includes Tokyo’s core consumer price index (CPI), which is expected to show a 0.8 percent rise in August from a year earlier, unchanged from the previous month.

The Tokyo index, which includes oil products but excludes fresh food prices, is available a month before nationwide core CPI.

Electricity and gasoline prices underpinned Tokyo’s core CPI but prices of other items stayed weak, analysts say.

The government will release Tokyo core CPI and the jobs data at 8:30 a.m. on Aug. 31 (2330 GMT on Aug. 30).

The Bank of Japan last month conceded inflation could fall short of its elusive 2 percent target until early 2021 and made its policy framework more sustainable as options dwindle.

Japan’s economy rebounded in April-June led by strong household and business spending but risks from global trade tension cloud the outlook for the export-reliant economy.

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