(Bloomberg) -- Gains in Japan's industrial production maintained pace in October, beating estimates and signaling continued recovery despite a resurgence of the coronavirus that threatens the outlook.
Factory output gained 3.8% from September led by cars and general machinery including conveyor belts and cranes, the economy ministry reported Monday. Analysts had forecast a 2.4% increase.
Five straight months of production gains, the longest streak since 2016, adds to evidence the economy continued to rebound in October from its record collapse in the second quarter.
Still, output remains below its pre-pandemic level at the end of 2019 and record virus cases in key export markets and in Japan are likely to hit demand in coming months. Monday's report showed manufacturers see production dropping in December after a sixth month of gains in November.
What Bloomberg Economics Says...
“Fresh waves of Covid-19 infections in Europe and the U.S. have started to restrict business activities, weighing on private demand. In Japan, high-frequency gauges point to slippage amid a run-up in new cases of Covid-19. Together, these point to slower production growth in 4Q.”
--Yuki Masujima, economist
For the full report, click here.
Key Insights
- “I don't really see the pace of recovery continuing,” said economist Takeshi Minami, at Norinchukin Research Institute, adding that a rebound in car production had helped the manufacturing sector claw back about 80% of production lost since May's bottom. “I see the rebound hitting a ceiling. Autos have recovered quite a bit, but I don't see sales growing at an even faster pace from here.”
- Exports to the U.S. and China, Japan's two biggest markets, have offered key support to manufacturers so far during the recovery, but virus infection rates are soaring again in the U.S. Record cases have also led to more lockdowns in parts of Europe.
- At home, Tokyo and Osaka last week called on some businesses to close early, while the northern prefecture of Hokkaido implemented its own measures to stem the virus's spread. The steps could weigh on demand.
- Prime Minister Yoshihide Suga's government is drafting a third extra budget to fight the crisis. A key ruling party lawmaker in an interview last week said that stimulus package may not be the last, given the uncertainty surrounding the spread of the virus.
Get More
- Industrial production fell 3.2% in October from a year ago. Economists had projected a 4.6% drop.
- The report showed output is forecast to rise 2.7% in November and decrease 2.4% in December.
- A separate report showed retail sales rose 0.4% in October from the previous month, compared with a 0.5% gain forecast by economists.
- Retail sales gained 6.4% in October from a year ago, when sales slumped due to an increase in the sales tax. Analysts predicted a 6.2% increase.
- Sales at department stores and supermarkets rose 2.9% from a year ago. Analysts expected a 5% rise.
©2020 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
