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Industrial output slips amid Japan weakness
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JAPAN’S industrial output fell in February at the fastest pace in eight months due to declines in production of machinery, cars and electronics in a worrying sign that domestic demand could be faltering.
Economists were already braced for a fall as many companies were expected to trim output due to the timing of Lunar New Year holidays, but the 3.4 percent month-on-month decline in February was much worse than expected at almost double the median estimate for a 1.8 percent fall.
Manufacturers’ forecasts for the coming months still point to a gradual recovery in output, but the outlook is less certain and could complicate the Bank of Japan’s task as the economy slowly rebounds from last year’s recession.
“These results are a little worrying, because the decline in auto output could be due to weak domestic demand,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “Output is still on course to recover, but another disappointing number makes this scenario less likely.”
February’s output slump was the biggest since last June, when it also fell by 3.4 percent.
Manufacturers surveyed by the trade ministry expect output to fall 2 percent in March and rise 3.6 percent in April.
If output continues to weaken, it would suggest that consumers are buying less goods and that companies will need to hire fewer workers, in turn hampering Tokyo’s plan to revitalize the world’s third-biggest economy and shake off years of deflation.
The data come two days before the BOJ’s closely watched tankan survey, which is expected to show business sentiment improved in the first quarter.
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