Japan’s April factory output extends gains, retail sales jump

FILE PHOTO: Smoke rises from a factory during the sunset at Keihin industrial zone in Kawasaki

TOKYO (Reuters) – Japan’s industrial output rose in April, helped by the production of general purpose and electrical machinery, in a sign manufacturers continued to benefit from a recovery in appetite for goods in the United States and China.

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The world’s third-largest economy is expected to grow in the current quarter at a much slower pace than previously thought after the government extended coronavirus emergency measures in Tokyo and other major areas.

Separate data on Monday showed retail sales, a key gauge of consumer spending, surged in April, thanks largely to favourable statistical base effects from a year earlier, when the country was under an even stricter coronavirus curbs.

Official data released on Monday showed factory output grew 2.5% from the previous month in April, as higher production of general-purpose and electrical machinery offset a contraction in cars and transportation equipment output.

The rise in output was better than the previous month’s 1.7% gain, but much weaker than a 4.1% advance forecast in a Reuters poll of economists as car production fell largely due to supply issues with semiconductor chips.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to shed 1.7% in May, followed by a 5.0% rebound in June.

The government kept its assessment of industrial production unchanged, saying it was picking up.

Factory output had posted a surprise increase in March, as a jump in car production helped keep the economic recovery on track.

Some analysts worry that Japan’s economy could fall into recession in the current quarter, after the government extended a COVID-19 emergency for Tokyo and other major areas until June 20, which is hurting consumer spending.

After emerging from last year’s slump, the economy contracted in the first quarter as a slow vaccine rollout and repeated emergency measures put in place to halt a resurgence of infections dealt a blow to consumption.

In April, retail sales soared 12.0% compared with the same month earlier, the government said on Monday, mainly due to statistical base effects.

Compared to the previous month, retail sales shed 4.5% on a seasonally adjusted basis, as consumer sentiment struggled with the most recent measures to stem a halt in coronavirus infections.

(Reporting by Daniel Leussink and Yoshifumi Takemoto; Editing by Sam Holmes)