Japanese industrial production dived in May for the first time in three months, official data showed Thursday, in a worrying sign for the already fragile economy.
Factory output dropped 2.3% in May from a month earlier, much worse than the average 0.2% drop expected by economists, according to Bloomberg News. The weak figures come after Japan logged a trade deficit in May, its first since January, while retail sales come in flat.
The yen’s surge in response to Britain’s vote last week to quit the European Union is also threatening Japanese firms’ profits, after the world’s No. 3 economy dodged falling into recession in the first quarter.
“The sharp fall in industrial production in May suggests that the economy slowed in the second quarter following a solid rise in GDP in Q1,” Marcel Thieliant from research house Capital Economics said in a commentary.
Thursday’s data also come ahead of parliamentary elections next month seen as a referendum on Prime Minister Shinzo Abe’s faltering growth plan, dubbed Abenomics. Half of the 242 seats in Japan’s upper house are up for grabs in the July 10 vote — although Abe’s premiership will not likely be contested.
Abenomics had a promising start as it sharply weakened the yen, a plus for Japan’s exporters, which set off a stock market rally. But promised reforms have been slow in coming and there are growing doubts about its prospects. The International Monetary Fund said this month the plan needed to be “reloaded” with steps to boost wages and bring about labour reforms.
The policy blitz — a mix of massive monetary easing, government spending and red-tape slashing — is aimed at pulling Japan free from years of deflation that weighed on growth. But consumer prices fell for a second straight month in April, with May figures on tap for Friday along with the Bank of Japan’s closely watched Tankan business confidence survey.
A poor reading will hike pressure on the central bank to unleash more easing measures to boost the economy.
Copyright Agence France-Presse, 2016
Canada’s Economy Posts First Growth in Three Months
Canada’s gross domestic product eked out the first gain in three months in April as gains in manufacturing and housing exceeded a drop in heavy oil production. Output grew 0.1%, Statistics Canada said Thursday in Ottawa, matching the median forecast in a Bloomberg survey of economists.
Consumers once again did much of the heavy lifting, a sign of strength policy makers are trying to temper because of what they call an alarming housing-price surge in Vancouver and Toronto. Retailing advanced 0.2% led by furniture stores, and the output of real estate brokers gained 3.3%, the seventh straight increase.
On the goods-producing side, manufacturing gained 0.4% on chemicals and beverages, while heavy oil production dropped by 7.3% as companies did maintenance.
Falling crude oil production is likely to shrink the economy from here, with Alberta wildfires in May knocking about 1 million barrels of production a day offline and forcing the evacuation 80,000 people from Fort McMurray. Bank of Canada Governor Stephen Poloz signaled this month the economy may shrink in the second quarter — in a speech just before the Brexit vote added a new complication.