• Kyodo

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Industrial output fell a seasonally adjusted 2.3 percent in May from the previous month, marking the first drop in three months, the government said Thursday. It cited a weakening in the manufacture of cosmetics, equipment and electronic parts.

The index of output at factories and mines stood at 95.0 against the base of 100 in 2010, the Ministry of Economy, Trade and Industry said in a preliminary report.

It was the first fall since February and followed a 0.5 percent gain in April, coming amid growing concerns about weakening export demand and a strong yen.

The ministry maintained its basic assessment, saying that the output trends are fluctuating without a clear direction.

“The drop was unexpected,” a ministry official told reporters, adding that the index has been moving in an “unstable” manner.

The nation’s auto industry suffered disruption in April when a series of earthquakes in Kyushu interfered with supply chains.

The output of passenger cars was recovering, but that of some minicars was affected by a fuel economy scandal in April, weighing on the transport machinery sector in the reporting month.

The transport machinery sector as a whole gained 0.7 percent.

The chemicals sector was the biggest contributor to the index’s decline, with a 7.5 percent drop from April, when cosmetics production increased.

The machinery sector — which supplies the construction industry — marked a 2.2 percent fall, and the electronic parts and devices sector was down 3.2 percent amid a fall in the production of integrated circuits and semiconductor devices.

The index of industrial shipments fell 2.3 percent to 93.8, while that of inventories was up 0.3 percent at 113.7. It is projected to increase 1.7 percent in June and 1.3 percent in July.

Volatility in financial markets amid uncertainty about the impact of Britain exiting the European Union is also a concern, some analysts said.

“We expect production to be weak for the time being, taking into account factors such as financial market turmoil triggered by Britain’s decision to leave the European Union,” said Shunsuke Kobayashi, an economist at the Daiwa Institute of Research.

Kobayashi added that consumer spending will take time to recover fully, adding that the yen’s advance will dampen corporate earnings and thus limit corporate expenditure, which in turn may depress output.

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