TOKYO (Reuters) – Japan’s factory output likely fell again in August as the country’s manufacturing sector faced supply chain disruptions driven by a global chip shortage and the spread of the Delta coronavirus variant in Southeast Asia.

The poll also indicated that retail sales declined in August, following an increase in July. This demonstrates the fragility in domestic consumption, and undermines the hopes of policymakers for an export-based recovery in Japan from the coronavirus pandemic.

Separate data will show that Japan’s unemployment rate increased in August while job availability improved a bit. This could have serious implications for consumers spending in Japan, the third largest economy in the world.

These weak data highlight the difficulties the LDP’s new leader, the Liberal Democratic Party (LDP), will have to face to combat COVID-19 and keep the economy in balance.

According to a Reuters poll of 19 economists, data from the Ministry of Economy, Trade and Industry will show that industrial output decreased 0.5% from August 2017. Although output declined for the second month straight, it did so at a slower rate than July when it fell 1.5%.

Exports of capital goods and cars have been the mainstays in Japan’s recent recovery. Analysts are concerned that the slowing Chinese economy and supply shortages in Southeast Asia could lead to lower output and higher export demand, which would threaten Japan’s recovery after the devastating pandemic.

Takeshi Minami (chief economist at Norinchukin Research Institute) said that car production was still under strain and China’s recovery from COVID pain seemed to be slowing down.

According to poll results, retail sales declined 1.0% in August compared with a year before. In July, they grew 2.4%. The decline would mark the sixth consecutive year of year-on–year sales drops.

At 8:50 AM, both retail and industrial sales data will be released by the Ministry of Economy, Trade and Industry. (Sept. 29 at 2350 GMT).

According to the Ministry of Economy, Trade and Industry, the country’s unemployment rate will rise slightly, to 2.9% in August, from 2.8% in July. However, the ratio jobs to applicants was forecast to decrease to 1.14, from 1.15 the month before.

October 1st at 8:30 AM (Sept. 30, at 2330 GMT) will see the release of job figures.

The August housing starts data is due to be released on September 30th at 2 pm (0500 GMT). This will likely show a 9.5% rise in August after July’s 9.9% increase.