TOKYO (Reuters) – Both Japan’s factory output and retail sales likely fell at a sharper pace in March as the coronavirus pandemic weighed more heavily across the broader economy, a Reuters poll showed.
A marked slowdown in export and domestic demand since the crisis began is widely believed to have pushed the world’s third-largest economy into recession, though analysts do expect some improvement in the second half of the year if there are signs that the outbreak is being contained.
Industrial output is forecast to have fallen 5.2% in March from the previous month, the biggest drop since comparable data became available in 2013, the poll of 16 analysts showed, after a revised 0.3% slip in February.
“We expect the factory output dropped significantly due to poor auto sales in the United States and Europe, supply chain disruptions and damage to investment appetite due to an increasing uncertainty for the outlook,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
The poll also showed retail sales were expected to fall 4.7% in March from a year earlier, the biggest drop since the sales tax was raised last October and reversing a 1.6% gain in February.
Apart from supermarkets and drug stores, “the pace of decline in retail sales will accelerate in April,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
The trade ministry will publish both factory output and retail sales at 8:50 a.m. Japan time on Thursday, April 30 (2350 GMT Wednesday).
Japan’s jobless rate likely inched up at 2.5% in March from 2.4% in February and the jobs-to-applicants ratio slipped to 1.40 from 1.45, according to the poll.
“The coronavirus spread hurt the service sector such as hotels, transportations and restaurants and labor demand likely deteriorated,” said Minami of Norinchukin Research Institute.
The job market figures will be announced at 8:30 a.m. on Tuesday.
The poll also showed Tokyo’s core consumer price (CPI) index, which includes oil products but excludes fresh food prices, rose just 0.1% in April from a year earlier, from a 0.4% increase in March, dragged down by oil price declines.
The Tokyo core CPI will be published on Friday.
Analysts expect the Bank of Japan will keep its short-term rates at minus 0.1% and 10-year government bond yields around zero percent at its policy meeting on Monday, the poll showed.
Separately, the Nikkei business daily reported on Thursday that the central bank will discuss scrapping its cap on government bond purchases at its next policy meeting on April 27, looking to cushion the economy against a sharp downturn caused by the coronavirus outbreak.
Private business surveys this week showed Japan’s services sector shrank at a record pace in April, while factories also fell quiet across the country after a spike in virus cases prompted the government to announce a month-long state of emergency.
The economy looks set to contract at an annual rate of more than 10% in the current quarter, said Joe Hayes, economist at IHS Markit, which compiles the surveys.
The government on Thursday offered its bleakest assessment of the economy in over a decade amid growing fallout from the crisis. It has announced a record $1.1 trillion stimulus package, including cash payouts to residents.
(Reporting by Kaori Kaneko; Editing by Kim Coghill)