(Bloomberg) -- Japan’s factory output dropped again in December, fueling concern that a moderately rebounding economy is facing strong headwinds as weakness in Chinese growth and the U.S-China trade war hit global demand.
Industrial output edged down 0.1 percent from a month earlier, falling for the seventh time in the last nine months, according to economy ministry data released Thursday. The fall was smaller than economists’ median estimate of a 0.5 percent drop.
Key Insights
- December’s industrial output is one of last key pieces of data used to determine how the economy fared in the fourth quarter following the biggest contraction since 2014 in the three months through September.
- Despite the fall in December, overall factory output rose by 1.9 percent in the fourth quarter for the biggest gain in nearly five years, largely on the back of a surge in October that marked a recovery from natural disasters the previous month. That supports economists’ view of a modest rebound in overall growth in the last three months of 2018.
- Momentum in production is likely to show continued weakness in early 2019, given sluggish exports affected by the U.S.-China trade fight and China’s slowdown. Early PMI data for January points to a sharp scaling back of output.
- Any weakness in the economy will be a concern for Prime Minister Shinzo Abe prior to a scheduled sales tax increase in October. A previous hike in 2014 caused a sharp contraction.
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- Output decreased 1.9 percent from the same period a year earlier, compared with an estimate of a 2.3 percent drop.
- Japan’s economy ministry sees output falling 0.1 percent in January before rising 2.6 percent in February.
