June 26, 2020 / 5:43 AM / 6 days ago

Japan's May factory output, retail sales to extend slump as coronavirus bites: Reuters poll

TOKYO (Reuters) - Japan’s factory output and retail sales likely contracted again in May as the coronavirus pandemic disrupted supply chains and triggered a sharp drop in domestic and global demand, a Reuters poll showed on Friday.

FILE PHOTO: Smoke rises from a factory during sunset at Keihin industrial zone in Kawasaki, Japan, January 16, 2017. REUTERS/Toru Hanai

Slumping exports and weak private spending due to the health crisis underscore risks that the world’s third-largest economy has slipped into deep recession and may only see a modest recovery in the second half of this year.

Industrial production was seen down 5.6% in May from the previous month, a Reuters poll of 17 economists found, falling for a fourth straight month but less sharply than a revised 9.8% drop in April.

“The surrounding environment for the manufacturers remains severe as exports sharply dropped in May. We expect factory output also fell especially transportation machineries,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

He added key points to watch would be manufacturers’ factory output forecasts for June and July. Japan’s state of emergency lasted from April through late May, which prompted people to stay home and businesses to close.

“The focus will be how the pace of such a rebound will be.”

A private business survey released Tuesday showed Japan’s factory activity remained stuck at an 11-year low in June, even as services-sector activity picks up.

The poll also showed retail sales are expected to fall 11.6% in May from a year earlier, down for a third month in a row, after a revised 13.9% drop in April.

The trade ministry will publish retail sales at 8:50 a.m. Japan time on Monday, June 29 (2350 GMT Sunday) and release factory output on Tuesday.

Japan’s jobless rate rose 2.8% in May, which would be its highest since December 2017, the poll showed. And the jobs-to-applicants ratio fell to 1.23, the lowest since September 2015.

“People may start looking for a job as the businesses restarted to re-open. But the jobs environment is expected to worsen further as firms will postpone hiring amid strong uncertainty over the outlook,” said Yusuke Shimoda, senior economist Japan Research Institute.

The government will announce job market data on June 30.

Reporting by Kaori Kaneko; Editing by Kim Coghill

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