–Industrial Output Posts 2nd Straight Rise on Month, Prompting METI to Upgrade its View
–Retail Sales Up on Recovery at Department Stores, Demand for Autos
–Payroll Growth Continues but Unemployment Rate Rises Unexpectedly
–April Tokyo CPI, Leading Indicator of National Data, Accelerates at Fast Pace
By Max Sato
(MaceNews) – Japan’s manufacturing sector is weathering slowing global demand, thanks to easing supply constraints, while consumer spending on goods and services remains resilient after the government eased Covid public health rules, according to official data on production, retail sales and employment.
Japan’s industrial production posted a modest 0.8% rise on the month in March after a sharp 4.6% rebound in February and a 5.3% plunge in January, thanks to easing parts supply constraints for the auto industry and higher domestic and overseas demand for production machinery, preliminary data released Friday by the Ministry of Economy, Trade and Industry showed.
From a year earlier, factory output marked a fifth straight decline, down 0.7%, but it was smaller than anticipated.
The METI’s survey of producers indicated that output is likely to post a modest 1.8% gain on the month in April (after adjustment for the data’s upward bias) before falling 2.0% in May.
METI Upgrades View on Factory Output
The ministry upgraded its assessment after downgrading it in November, saying industrial output “is showing signs of a gradual pickup.” Previously, it had said, production “has weakened.”
The METI said it will keep a close watch on the effects of parts and materials supply shortages and rising prices. It dropped its reference to the impact of a rise in Covid cases on domestic and global growth as it has been largely contained in Japan.
Factory production slipped a seasonally adjusted 1.8% on quarter in the January-March period after falling 3.0.% in October-December, rebounding 5.8% in July-September and falling 2.7% in April-June last year.
In fiscal 2022 that ended in March, output fell an unadjusted 0.2% on year after rising 5.8% in fiscal 2021, slumping 9.6% in fiscal 2020 and sliding 3.8% in fiscal 2019. Global growth is slowing after last year’s aggressive credit tightening by major central banks.
Q1 Core Capital Goods Shipments Slump
Shipments of capital goods excluding transport equipment — a key indicator of business investment in equipment in GDP data — slumped 6.4% on quarter in January-March after falling 6.9% on quarter in October-December after surging 13.1% in July-September and rising 1.3% in April-June. It is making a possible rebound in capital investment uncertain, which is one of the key factors for solid growth in the first quarter GDP due on May 17.
Economists expect Japan’s economy to post a modest 1.6% gain at an annualized pace in January-March, led by resilient consumer spending and a rebound in business investment in equipment, after a slight 0.1% rise in the previous quarter. Capital investment marked its first drop in three quarters in October-December, down 0.5% on quarter, following solid gains.
Retail Sales Remain on Uptrend
In another key indicator, Japanese retail sales posted their 13th straight year-on-year increase in March, with the pace of increase at 7.2% above forecast again and nearly matching February’s upwardly revised 7.3% jump, led by continued recovery in department store sales, a pickup in new vehicle sales, rising costs for food and beverages, data released Friday by the Ministry of Economy, Trade and Industry showed.
Sales of automobiles jumped 21.0% on year in March after rising 17.0% in February. Sales of food and beverages, which have the largest share in retail sales, posted their sixth straight rise, up 5.1%, after a 5.5% gain the previous month.
General merchandise sales at department stores and supermarkets marked the 13th straight year-on-year gain, up 5.4% in March, following a 10.3% rise in February. Sales of apparel and accessories recorded the fourth straight gain, up 1.9% after rising 8.9% the previous month.
On the month, retail sales edged up 0.6% on a seasonally adjusted basis in March for the fourth straight increase after rising 2.1% (revised from a 1.4% rise) in February. It was above the median forecast of a 0.3% rise (forecasts ranged from a 1.1% drop to a 1.9% rise).
The ministry maintained its assessment after upgrading it for the second straight time last month, saying retail sales are “on an uptrend.” Previously, it had said retail sales were “on a gradual uptrend.” It noted that the three-month moving average in seasonally adjusted retail sales rose 1.2% in March for the ninth straight gain after rising 1.1% in the previous month.
Domestic demand is likely to be supported by consumer spending as the economy continues to reopen, but the purchasing power of many households has been hurt by rising costs for daily necessities and falling real wages.
The monthly Economy Watchers Survey, which was conducted by the Cabinet Office from March 25 to March 31 and released April 10, indicated that confidence continued picking up in March on eased Covid public health rules, although some survey respondents noted rising food prices are limiting spending on clothing and elevated materials costs are squeezing corporate profits.
Inflation Faster Than Expected on Processed Food, Durable Goods
Consumer prices in Tokyo, the leading indicator of the national average, accelerated at a faster pace than expected in April, rising 3.5% on year in the total index and the core measure (excluding fresh food), as suppliers of fresh and processed food as well as durable goods makers continued passing higher costs on to customers, but were down from above 4% in January, thanks to expanded energy subsides, data from the Ministry of Internal Affairs and Communications released Friday showed.
The year-on-year increase in the core-core CPI (excluding fresh food and energy) surged to 3.8%, a 41-year high, from 3.4% as it is not affected by falling energy prices.
The prices of goods excluding fresh food rose 5.8% from a year earlier in April, pushing up the Tokyo area total CPI by 2.36 percentage points, with the pace of increase accelerating from 5.5% (a positive 2.24-point contribution) in March. The prices of services excluding owners’ equivalent rent gained 2.6% on the year, adding 0.92 points to the CPI, up from 2.3% (plus 0.81 point) March. The uptrend reflects moves among some firms to provide one-time benefits for employees to tide over surging costs for daily necessities and to secure qualified workers.
Unemployment Rate UP Unexpectedly
Japanese payrolls posted their eighth straight year-over-year growth in March as the reopening of the economy under eased Covid rules prompted hotels and restaurants to continue hiring more workers while the unemployment rate unexpectedly rose to 2.8% from 2.6% in February after sliding to a three-year low of 2.4% in January, data released Friday by the Ministry of Internal Affairs and Communications showed.
Compared to the previous month, more people quit their jobs to look for other openings, adding to the upward pressure on unemployment posed by a third straight monthly increase in the number of people who either lost their positions or retired.
The latest figure is below the recent high of 3.1% hit in October 2020 but is still above 2.2% recorded in December 2019, just before the pandemic triggered a global slump.
Compared to a year earlier, the number of employed rose 150,000, to an unadjusted 66.99 million in March for the eighth straight increase after rising 90,000 in February and surging 430,000 in January.
But the number of unemployed rose 130,000 on the year to an unadjusted 1.93 million in March, marking the first year-over-year rise in 21 months after falling 60,000 the previous month. It has drifted down from a pandemic peak of 2.17 million in October 2020 but is still above 1.60 million at the beginning of 2020.
As seen in recent months, the overall employment increase in March from a year earlier was led by hotels, restaurants and bars, a category which posted the ninth straight year-over-year gain, with the pace of increase accelerating from the previous month.
Employment also increased among information and telecommunications service providers but that in the medical and welfare category slumped after being flat the previous month.
Jobs in the wholesale and retail industry dropped on the year for the fourth straight month. Employment at construction firms declined after rising in the previous six months. Manufacturing jobs rose for the second month in a row following two months of decline.