Industrial output slipped for the second straight month in November, raising the likelihood that the economy will contract in the fourth quarter due to slowing demand abroad and at home.
Japan’s economy has cooled in recent months due to a prolonged hit to exports from soft global demand and a slide in consumer spending following a nationwide tax hike.
Official data showed factory output fell 0.9 percent in November from the previous month, a slower decline than the 1.4 percent fall in a Reuters forecast.
That followed a downwardly revised 4.5 percent decline in the previous month that was the largest month-on-month slump since the government started compiling the data in comparative form in January 2013.
“The overall economy including factory output is expected to contract sharply in the current quarter,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“It is expected to rebound in January-March, but the issue is how much it will recover.”
Production was pushed down by a decrease in output of production machinery and information equipment, which offset a bounce back in output of cars and car engines.
“There is still uncertainty for the economic outlook as the effects from the U.S.-China trade friction will likely remain, but there are positive signals for a moderate pickup in factory output,” said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to gain 2.8 percent in December and rise 2.5 percent in January, the data showed.
Separate data released Friday showed retail sales dropped a larger-than-expected 2.1 percent in November, as consumer sentiment remained depressed after October’s sales tax hike.
The weak readings could pressure the government to come up with new ways to boost growth and force the central bank to maintain its stimulus program.
“Economic sentiment has worsened overall,” said Shudai Hasegawa, a shopkeeper at a store selling rice, pickles and other foods in the Shinagawa area of Tokyo.
“There were fewer people in the shopping street here from the start of the year compared to the previous year, and also after the tax hike,” he said earlier this month.
Kota Watanabe, the manager of a store selling pillows and futon mattresses, said demand from consumers over 50 has been weak this year, partly due to warm weather.
“They say they are satisfied with cheap goods. There are also people saving money for their children instead of spending it themselves.”
The broader economy is likely to stay under pressure as weak business and consumer confidence, and a delayed pickup in global growth, hurt demand.
The government last week cut its overall view on the economy for the fourth time this year due to a downgrade in its assessment of manufacturing output.
The Bank of Japan stood pat last week, though it warned risks to the recovery remained high and offered a gloomier view on output.
Also last week the government approved a record budget for the coming fiscal year. Part of the planned spending will help finance a $122 billion fiscal package to shore up growth.
Meanwhile, Japan’s jobless rate fell in November, while the jobs-to-applicants ratio held steady, suggesting the nation’s tightest jobs market in decades is holding up.
The seasonally adjusted unemployment rate fell to 2.2 percent in November from 2.4 percent the previous month, Ministry of Internal Affairs and Communications data showed.
The jobs-to-applicants ratio was unchanged at 1.57 in November from the previous month, health ministry data showed.
Canadian dollar moves to extend weekly win streak as oil rebounds
The Canadian dollar strengthened against its U.S. counterpart on Friday and was on track for its seventh straight weekly gain as oil prices rose and domestic data added to evidence of robust economic growth in the first quarter.
Canadian factory sales rose 3.5% in March from February, led by the motor vehicle, petroleum and coal, and food product industries, while wholesale trade was up 2.8%, Statistics Canada said.
The price of oil, one of Canada‘s major exports, reversed some of the previous day’s sharp losses as stock markets strengthened, though gains were capped by the coronavirus situation in major oil consumer India and the restart of a fuel pipeline in the United States.
U.S. crude prices rose 1.2% to $64.61 a barrel, while the Canadian dollar was trading 0.6% higher at 1.2093 to the greenback, or 82.69 U.S. cents, moving back in reach of Wednesday’s 6-year peak at 1.2042.
For the week, the loonie was on track to gain 0.3%. It has climbed more than 5% since the start of the year, the biggest gain among G10 currencies, supported by surging commodity prices and a shift last month to a more hawkish stance by the Bank of Canada.
Still, BoC Governor Tiff Macklem said on Thursday if the currency continues to rise, it could create headwinds for exports and business investment as well as affecting monetary policy.
The U.S. dollar fell against a basket of major currencies, pressured by a recovery in risk appetite across markets after Federal Reserve officials helped calm concerns about a quick policy tightening in response to accelerating U.S. inflation.
Canadian government bond yields were lower across much of a flatter curve, with the 10-year down 2 basis points at 1.549%. On Thursday, it touched its highest intraday in eight weeks at 1.624%.
(Reporting by Fergal Smith; Editing by Nick Zieminski)
Toronto Stock Exchange rises 1.21% to 19,366.69
* The Toronto Stock Exchange‘s TSX rises 1.21 percent to 19,366.69
* Leading the index were SNC-Lavalin Group Inc <SNC.TO>, up 16.0%, Village Farms International Inc, up 9.8%, and Denison Mines Corp, higher by 9.4%.
* Lagging shares were Aurora Cannabis Inc, down 7.2%, Centerra Gold Inc, down 3.8%, and Canadian National Railway Co, lower by 3.7%.
* On the TSX 194 issues rose and 35 fell as a 5.5-to-1 ratio favored advancers. There were 25 new highs and no new lows, with total volume of 225.7 million shares.
* The most heavily traded shares by volume were Enbridge Inc, Manulife Financial Corp and Cenovus Energy Inc.
* The TSX’s energy group rose 3.32 points, or 2.7%, while the financials sector climbed 4.80 points, or 1.3%.
* West Texas Intermediate crude futures rose 2.65%, or $1.69, to $65.51 a barrel. Brent crude rose 2.68%, or $1.8, to $68.85 [O/R]
* The TSX is up 11.1% for the year.
This summary was machine generated May 14 at 21:03 GMT.
U.S., Mexico, Canada to hold ‘robust’ talks on trade deal
The United States, Mexico and Canada will next week hold their first formal talks on their continental trade deal, with particular focus on labor and environmental obligations, the U.S. government said on Friday.
“The ministers will receive updates about work already underway to advance cooperation … and will hold robust discussions about USMCA’s landmark labor and environmental obligations,” the office of U.S. Trade Representative Katherine Tai said in a statement.
The United States is also reviewing tariffs which may be leading to inflation in the country, economic adviser Cecilia Rouse told reporters at the White House on Friday, a move that could affect hundreds of billions of dollars in trade.
The United States, testing provisions in the new deal aimed at strengthening Mexican unions, this week asked Mexico to investigate alleged abuses at a General Motors Co factory.
(Reporting by David Ljunggren; Editing by Hugh Lawson and Jonathan Oatis)
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