Japan factory output unexpectedly falls as exports of cars to US slow

Newly manufactured cars and trucks awaiting export at port in Yokohama, Japan, on Jan 16, 2017.
Newly manufactured cars and trucks awaiting export at port in Yokohama, Japan, on Jan 16, 2017. PHOTO: REUTERS

TOKYO (REUTERS) - Japan's industrial output unexpectedly fell in January for the first time in six months, knocked by a slowdown in shipments of cars to the United States in a sign of an economy grappling for a sustainable recovery.

Data by the Ministry of Economy, Trade and Industry on Tuesday (Feb 28) showed industrial output fell 0.8 per cent in January, versus a median market forecast for a 0.3 per cent increase and a revised 0.7 per cent gain the previous month.

It was the sharpest month-on-month decline since May 2016.

The ministry said factories curbed production due to a slowdown in shipments of cars to the United States, where President Donald Trump has ratcheted up his criticism of major nations, including Japan, for stealing US jobs.

Data this month showed Japan's exports to the US fell 6.6 per cent in January from a year ago.

Manufacturers surveyed by the ministry expect output to rise 3.5 per cent in February but to decrease 5.0 per cent in March.

Separate data by the ministry showed Japanese retail sales rose 1.0 per cent in January from a year earlier, versus a median market forecast for a 0.9 percent gain.

That was the third straight month of annual gains, indicating a gradual pickup in consumer spending.

Tuesday's batch of data signalled that the world's third largest economy remained on a fragile footing, as uncertainty over Trump's economic policies cloud the global outlook. Trump's repeated pledges to pull back from free trade have raised concerns that protectionism will spread.

The ministry maintained its assessment on industrial output, saying production was picking up.

Japan's economy grew an annualised 1.0 per cent in October-December as a weaker yen supported exports, while tepid private consumption and the risks of rising US protectionism cast doubts over a sustainable recovery.

A Reuters poll of economists projected last week that Japan's economy will grow 1.2 per cent in the fiscal year starting April and 1.0 per cent for fiscal 2018, versus growth of 1.5 per cent and 1.1 per cent forecast by the central bank, respectively.