Japan’s January factory output falls by most in a year

TOKYO — Japan’s factory output posted the biggest decline in a year in January in a sign slowing Chinese demand and the Sino-US trade war were taking a toll on the country’s manufacturing sector, a major driver of economic growth.

Adding to the gloom, retail sales in January fell short of economists’ forecast, slowing sharply from the previous month and dashing hopes that domestic demand may offset weakening external demand.

The batch of weak data reinforces policy makers’ concerns that sluggish output will hit growth in the world’s third-largest economy, with exporters curbing shipments and manufacturers halting production as the Sino-US tariff war hits trade with China.

The 3.7% fall in output, which closely tracks broader economic growth, was bigger than the median market forecast for a 2.5% drop and marked the third straight month of contraction, the data showed on Thursday.

Japan also faces a bumpy road ahead with manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) in the report expecting output to rebound 5.0% in February but decrease 1.6% in March.

Sharp drops in output of cars, electrical and production machinery, electronics parts and devices dragged down overall activity, a ministry official said, adding that a significant rebound is not expected for the time being.

The ministry cut its assessment of activity to say it was “stalling.” Previously, it was described as picking up gradually.

Japan’s economy rebounded in the fourth quarter as business and consumer spending recovered from the slump caused by natural disasters, but trade frictions and a planned sales tax hike in October have stoked fears of a recession this year.

Underscoring fragile domestic demand, separate data showed on Thursday retail sales grew just 0.6% year on year in January, dragged down by sluggish sales at department stores and online retailers and of items like food, beverages and clothing.

The figure compared with economists’ median estimate for a 1.1% rise, slowing sharply from a 1.3% gain in December.

On the seasonally adjusted basis, retail sales dropped 2.3% month on month in January, a worrying sign for private consumption, which accounts for about 60% of the economy. —