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TOKYO – Japan’s industrial production fell in July as auto production was hit by a resurgence of the coronavirus in Asia that has cast doubt on the recovery of the world’s third-largest economy.
A spike in cases of highly contagious Delta variants has forced Asian governments to impose new lockdowns and restrictions, disrupting the supply of spare parts to the region, exacerbating a global chip shortage.
“There is a risk that production will stagnate by the end of the year,” said Takeshi Minami, chief economist at the Norinchukin Research Institute. “Auto production is expected to be a drag on production in August and September.”
Factory production fell 1.5% in July from the previous month, according to official data released on Tuesday, hit by lower production of vehicles, including passenger cars and small buses.
The decline offset growing production of production machine items, such as those used in the manufacture of semiconductors and electronic parts and devices.
This means that production fell below pre-coronavirus pandemic levels again after jumping 6.5% the month before, although it was larger than an expected 2.5% drop. in a Reuters poll of economists.
Manufacturers polled by the Ministry of Economy, Trade and Industry (METI) expected production to grow 3.4% in August and 1.0% in September.
Overall output is expected to be boosted by a sharp increase in the manufacturing of production machinery next month, although that of transportation equipment, which includes auto production, fell by more than 7% from the previous month.
But forecasts for the decline in transportation equipment likely did not fully take into account disruptions in the supply of spare parts in Southeast Asia, a government official said.
Toyota, the world’s largest automaker by sales volume, said this month it will reduce September production by 40 percent from its previous plan due to the chip tightening.
Finely-tuned supply chains from manufacturers mean that automakers often optimize the supply of auto parts, increasing the risk of production delays once stocks run out and spare parts don’t show up, said. Minami.
Separate data released on Tuesday showed the unemployment rate edged down for the second month in a row, falling to 2.8% from 2.9% in June, with the actual number of unemployed posting the first year-on-year decline in 18 months .
An index measuring job availability edged up to 1.15 from 1.13 in June, according to data from the Ministry of Labor.
A separate government investigation showed consumer confidence deteriorated in August, falling to its lowest level in three months, as broader restrictions in response to the growing number of COVID-19 cases weighed on the will of consumers. people to spend.
The Japanese economy grew 1.3% annualized in the second quarter, driven by strong consumption and exports.
But growth is expected to remain modest in the current quarter, with some analysts predicting a possible contraction, as the country grapples with a resurgence of COVID-19, which has plagued medical facilities and shows no signs of slowing down.
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