Japan’s industrial output dropped by 1.5pc in July as car production suffered due to the resurgence of COVID-19 pandemic in Asia. The shortfall in auto manufacturing slowed the pace of recovery of the Japanese economy.
The surge in Delta variant cases led to Asian countries imposing fresh curbs and lockdown measures that disrupted the supply chain in addition to the already existing chip shortage. Local media reported that the industrial output will continue to be at risk till year-end and the car output could lag in August and September as well.
The official data showed that the factory output in July dropped by 1.5pc from June, led by the decline in production of passenger cars and small buses. Overall, car production dropped by 7pc from June.
The data showed the dropped in the output of machinery used for manufacturing semiconductors, electronic parts, and devices. This is in contrast to June’s industrial output growth of 6.5pc from May.
Ministry of Economy, Trade, and Industry (METI) estimates that the output will advance by 3.4pc in August and 1.0pc in September.
Earlier, Toyota Motors announced plans to cut September production by 40pc.
The Japanese economy expanded by 1.30c in Q2 from the prior-year period on higher consumption and exports. Economic growth is expected to remain modest in the current quarter as Japan continues its struggle with the resurgence of COVID-19, which is burdening its medical facilities and showing no signs of abating.