Industrial output across Japan continued to increase for the second consecutive month during July, raising hopes that the economy may be on a gradual path towards recovery after the coronavirus pandemic. According to data released by the Ministry of Economy, Trade and Industry (METI), Japan’s factory output grew by 8% MoM after posting a 1.9% rise in June.

The rate of growth beat economists’ forecast for a growth of 5.8% in the sector. However, despite the optimistic rate of growth, factory activity remains well below pre-pandemic levels seen before March.

In more worrying signs for the Japanese economy, retail sales continued to decline for the fifth consecutive month during July, and at a faster pace than the previous month and economists’ expectations. Retail sales dropped by 2.8% YoY in the month of July vs. a 1.2% fall seen in June and a forecast for a drop of 1.7% instead.

Japan’s economy had contracted by a record high of 27.8% during Q2 2020, but economists anticipate growth to improve in the current quarter. However, the recent economic data points to economic recovery taking longer than previously anticipated, even as the threat of a second wave of coronavirus clouds the outlook.