TOKYO (Reuters – Japan’s factory output declined in December, citing lingering supply problems. This was according to a Reuters poll.

Retail sales grew for the third consecutive month of December due to low COVID-19 incidences, which encouraged shoppers, until Omicron variant drove up infection to an all-time high.

While the third-largest global economy is likely to have rebounded in the quarter ended 2021 it’s uncertain whether it can sustain momentum. A new wave of coronavirus infections disrupting supply chains has dampened demand and caused disruptions.

According to the survey of 19 economists, industrial output is expected to fall 0.8% from December.

This would be the third consecutive month of declines and follows a strong 7.0% increase in November.

Takumi Takumi, Shinkin Central Bank Research Institute senior economist, stated that “given the scarcity in semiconductor components, carmakers likely couldn’t put forth full effort to make up for earlier losses in production.”

Automakers have led the recovery of export-oriented manufacturing from supply restrictions in July-September, which was led by other automakers. However, some analysts believe the recovery is slow.

Takeshi Minami (chief economist, Norinchukin Research Institute) said that supply chain risks, ranging from an unrelenting shortage of chips to disruptions in the workforce due to COVID-19 infection, suggest that there could be downside risks for January production.

After growing 1.9% in November and 2.7% in December, retail sales saw a rise of 2.7% in December. This was likely because shoppers were optimistic in the face of low levels coronavirus infections.

Domestic COVID-19 case numbers began to rise rapidly in the beginning of this month. The government has imposed restrictions on face-to-face service provision in many areas.

The Ministry of Economy, Trade and Industry is going to release data for industrial production and retail sales on January 31st at 8:50 am (Jan.30 at 2350 GMT).

Also, the poll showed Japan’s unemployment rate likely to remain flat at 2.8%. The jobs-to-applicants ratio increased 0.01 points to 1.16 in December. On February 1, at 8:30 AM, job figures will be published (Jan. 31, at 2330 GMT).