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Japan factory output seen up again, pandemic clouds outlook: Reuters poll

TOKYO (Reuters) - Japan’s factory output likely grew for a second straight month in July, signalling a gradual recovery from the blow delivered by the coronavirus pandemic, a Reuters poll of 17 economists showed on Friday.

FILE PHOTO: Smoke rises from a factory during sunset at Keihin industrial zone in Kawasaki, Japan, January 16, 2017. REUTERS/Toru Hanai

The jobless rate probably rose in July and the availability of jobs likely fell, while retail sales were seen down again, the poll showed.

While the higher factory output would indicate demand was improving, weakening retail sales would be a worrying sign for private consumption, which accounts for more than half of the world’s third largest economy.

The mixed batch of data will likely underscore the fragility of an economy that suffered a record 27.8% contraction in the April-June quarter as the pandemic took a heavy toll on both domestic and external demand.

Economists say the economy has bottomed out but any recovery was seen modest as Japan, like many other countries, resumed economic activity only slowly given risks of a second wave of infections following the relaxation of lockdowns in late May.

“Economic activity is gradually normalising, with factory output seen picking up, centring on transport machinery,” said Shunpei Fujita, an economist at Mitsubishi UFJ Research and Consulting. “However, we cannot rule out the risk that output may falter depending on the spread of infections.”

Ministry of Economy, Trade and Industry (METI) data due out at 8:50 a.m. Monday (2350 GMT Sunday) will likely show Japan’s industrial output grew 5.8% in July from the previous month, following a 1.9% gain in June.

In May, output hit its lowest level since March 2009.

The job market, which before the pandemic had been its tightest in decades, is likely to have weakened in July. The poll saw the jobless rate rising to 3.0% from 2.8% in June and the jobs-to-applicants ratio edging down to 1.08 from 1.11.

Retail sales likely fell 1.7% year-on-year in July, after a 1.2% drop in June, the poll showed.

METI will issue retail sales data at 8:50 a.m. Monday (2350 GMT Sunday), while labour data is due at 8:30 a.m. Tuesday (2330 GMT Monday).

Separate data out at 2 p.m. Monday (0500 GMT) will likely show housing starts tumbled 12.5% in the year to July, broadly similar to June, the poll showed.

Reporting by Tetsushi Kajimoto; Editing by Simon Cameron-Moore

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