Japan July factory output falls but growth momentum seen intact

Humanoid robots work side by side with employees in the assembly line at a factory in Kazo, Tokyo.
Humanoid robots work side by side with employees in the assembly line at a factory in Kazo, Tokyo. PHOTO: REUTERS

TOKYO (REUTERS) - Japan's industrial output fell more than expected in July, pulling back from the previous month's gain, as manufacturers curbed production of general-purpose and electrical machinery in a likely sign of a temporary slowdown in factory activity.

Industrial output fell 0.8 per cent in July from the previous month, dragged down by production of semiconductor production equipment, turbines and power generators, preliminary government data showed on Thursday (Aug 31).

The reading compared with the median estimate of a 0.5 percent drop in a Reuters poll of economists, following a 2.2 per cent increase in June, data from the Ministry of Economy, Trade and Industry showed.

Still, manufacturers forecast factory output would rebound in August, underscoring the view that Japan's economy, the world's third-largest, is on track to extend a growth run in the current quarter on the back of better external and domestic demand.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 6 per cent in August and decline 3.1 per cent in September.

The ministry stuck to its assessment of industrial output, saying production is picking up over time.

Japan's economy expanded at the fastest pace in more than two years in the second quarter - growing at a 4 per cent annualised rate - as consumer and company spending picked up.

Analysts expect the economy to continue growing at a healthy clip in coming quarters, offering the Bank of Japan hope that a tight labour market will finally start to boost wages and consumer spending.