Japan's industrial production expanded for the second consecutive month in July, though growth moderated notably compared with June, according to data released Monday by the Ministry of Economy, Trade and Industry on Monday.

Industrial production rose 4.1% year over year in July, easing from the 4.9% expansion recorded the previous month. The pace of growth missed market expectations of a 4.1% increase tracked by Trading Economics.

Machinery production grew 16.4% year over year during the month, driven by semiconductor manufacturing and flat-panel display manufacturing equipment, the ministry said. Aircraft engine and airframe parts, as well as petroleum and coal, saw double-digit increases during the period.

Shipments grew 4.6% during the month, but inventories fell for the 18th straight month, landing at 2%.

On a month-over-month basis, factory output edged down 0.2%, the first time the print fell since March. The indicator declined from a 1.9% rise in June.

Japan's manufacturing capacity utilization rate rose by a seasonally adjusted 0.5% month over month in July, beating a 1.3% decrease tracked by Trading Economics. However, the pace of growth slowed significantly from the 4.1% increase the prior month.

The manufacturing capacity utilization index stood at 107.7 points against the 2020 baseline of 100, reflecting expanding operational activity across major industrial and production sectors.