Good and bad news for Japan's recovery in the industrial production and retail sales data for May, released this week.

The first bit of very good news is that the Japanese government now says the recovery from the slump set off by the March 11 disasters is underway.

[Sign up to get reports daily in your inbox]

That was part of another bit of good news in a solid rise in output in May, the best for 50 years.

The bad, perhaps, or worrying was a sharp and surprising slow down predicted by manufacturers for July when power blackouts and rationing are forecast because of the supply cuts caused by the nuclear power crisis at Fukushima.

In retail sales, a fall in headline sales was bad news, but a sharp rise in convenience store sales (which are far more important in Japan than in Australia) was the good news.

All in all a mixed result.

Japan's industrial production index rose 5.7% in May from April, led by a rebound in car output, the country's Ministry of Economy, Trade and Industry said yesterday.

That was much better than the 1.6% rise in April, but it was 5.9% down on May of last year.

The ministry said passenger cars and trucks were the top contributors to the gain, while the general machinery and chemicals sectors also boosted the result.

And, manufacturers tipped a further 5.3% gain for June, down from a previous forecast of 7.7%, and saw a sharp slowing in July, when they said output would rise just 0.5%.

The result was that the ministry upgraded its overall assessment of production to say that industrial output is on its way towards recovering from the damage caused by the Great East Japan Earthquake.

It had previously said output was still at low levels and sluggish, but that a recovery was expected.

Earlier figures from the same department showed a 1.3% year on the year fall in retail sales, making May the third straight month of decline. Same store sales fell 2.4%.

The fall was driven by another weak month for large retailers, including department stores and supermarkets which reported a 1.3% drop in headline sales and a sharper 2.4% drop in same store sales.

But sales at convenience stores rose 7.3%, with same-store sales climbing 5.1%.

Convenience stores are a vital part of Japan's retail trade.

Leading chain, 7-Eleven, for example, has around 13,000 outlets across the country on its own. There are several other big competitors.

Convenience stores are in fact a better barometer of Japanese retailing activity and consumer confidence than the big retailers which have suffered from weak to negative sales growth over the past two to three years.

Other figures out earlier in the week showed the country's restaurants and fast food outlets continue to do it tough in the wake of the March 11 disasters.

Sales in this sector fell for the third straight month in May.

Japan's Food Services Association said that sales at 207 restaurant chains nationwide dropped 2% from the same month last year.

The drop is attributed to a decline in the number of people eating out since the March disaster and the recent food poisoning cases at a barbecue restaurant chain.

But illustrating the sharp rise in output, there was a decided improvement in Japanese domestic production of passenger cars in May.

The total fell 32% (from May 2010) to 460,619 units in May, to be lower for the eighth straight month.

But the rate of fall was cut sharply from the 60.1% plunge in April.

Production recovered faster than expected, with some automakers seeing output return to positive growth.

Toyota's domestic production fell 54.4% to 107,437 vehicles, which was much better than the 78.4% plunge in April.

Honda's domestic output dropped 53.4% to 34,746 vehicles, but was better than April's massive 81% fall.

Mitsubishi Motors Corp, which returned to normal production in May, saw a 7.7% rise to 47,013 vehicles.

And Nissan's domestic output also returned to positive growth on a year-on-year basis, though the increase was small.

Nissan's output is now almost back to normal levels.

Copyright Australasian Investment Review.
AIR publishes a weekly magazine. Subscriptions are free at www.aireview.com.au

More from IBT Markets:
Follow us on Facebook.
Follow us on Twitter.
Subscribe to get this delivered to your inbox daily