© Reuters. FILE PHOTO: During the sunset in the Keihin industrial area in Kawasaki, smoke rises from a factory
TOKYO (Reuters) – Japan's factory and retail sales were likely to decline again in May, when the coronavirus pandemic disrupted supply chains and triggered a sharp drop in domestic and global demand, a Reuters poll released on Friday.
Slump in exports and weak private spending due to the health crisis underscore the risk that the world's third largest economy has slipped into a deep recession and may only recover slightly in the second half of this year.
According to a Reuters survey of 17 economists, industrial production fell 5.6% in May compared to the previous month. It fell for a fourth consecutive month, but was less steep than a revised 9.8% decline in April.
"The environment continues to be difficult for manufacturers as exports declined sharply in May. We expect factory production to decline, particularly for transport machinery," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
He added that important forecasts for manufacturers' factory production for June and July should be considered. Japan's state of emergency lasted from April to late May, causing people to stay at home and close shops.
"The focus will be on how fast such a recovery will be."
A private business survey released on Tuesday found that Japan's manufacturing activity remained at an 11-year low in June, although activity in the services sector is picking up.
The survey also found that retail sales in May are expected to decrease 11.6% year over year after a revised 13.9% decline in April for the third year in a row.
The Department of Commerce will release retail sales on Monday June 29 (Sunday, 2350 GMT) at 8:50 AM Japanese time and will release factory production on Tuesday.
Japan's unemployment rate rose 2.8% in May, which would be the highest since December 2017, according to the survey. The ratio of jobs to applicants fell to 1.23, the lowest since September 2015.
"People may be looking for a job when companies reopen, but the work environment is likely to deteriorate further as companies shift the hiring position due to the high level of uncertainty about the prospects," said Yusuke Shimoda, senior economist at Japan Research Institutes.
The government will release labor market data on June 30.
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