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Japan's Industrial Output Tumbles On Slower Car Sales

Japanese industrial output fell in May on slowing exports of cars and computers as the country's manufacturers turned more cautious over the global economic outlook, the government said June 29. May industrial output dropped 2.3% from April, when it rose a revised 1.9%. Economists had expected a drop of 2.5% and said that while the figures were slightly better than that, the outcome was still disappointing.

Output of transportation equipment, which includes cars and ships, fell 8.4 % in May while information telecommunication products such as personal computers and digital cameras dropped 11%. Transportation equipment alone accounts for 12% of Japan's total industrial output.

A trade ministry survey of manufacturers projected industrial output would rise 1.7% in June but decline 1.2% in July.

"The companies are not upbeat on the prospects of demand at home and abroad. As soon as they see slowing demand or rising inventories, they quickly cut back production," said Shinichiro Kobayashi, a senior economist at UFJ Institute.

In addition to the uncertain economic outlook, companies are also wary of boosting production amid rising oil prices explained Kobayashi. "We will see some effect from soaring oil prices on corporate earnings. With the cost of raw materials eating up profits, the companies will slash capital spending and eventually curtail production," Kobayashi said.

Copyright Agence France-Presse, 2005

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