tokyo jan 31 reuters  japans factory output shrank for the first time in three months in december as a decline in machinery outweighed a small rise in car production casting a cloud over the strength of the economic recovery retail sales posted their third straight month of yearonyear gains in december as low coronavirus cases encouraged shoppers record infections this month driven by the omicron variant of the virus however are expected to have hit consumer sentiment factory production lost 10 in december from the previous month pulled down by a decline in output of generalpurpose and production machinery including chipmaking equipment that meant that output which came in weaker than a 08 decline forecast in a reuters poll of economists dropped for the first time in three months the data showed output growth of cars and other vehicles slowed to 15 from the previous month in december much weaker than the 437 surge in november and a 159 jump in october major japanese automakers are still struggling with chip shortages toyota motor co 7203t the worlds biggest car seller said this month it expected production to fall short of an annual target of 9 million vehicles for its current business year that runs until the end of march due to the drag from the chip shortage read more manufacturers surveyed by the ministry of economy trade and industry meti expected output to grow 52 in january and 22 in february the government kept its assessment of industrial output unchanged saying it was showing signs of picking up separate data showed retail sales were weaker than expected rising 14 in december from a year earlier which was smaller than the median market forecast for a 27 rise that marked the third straight month of increases for retail sales which were lifted by stronger demand for general merchandise and food and beverages reporting by daniel leussink additional reporting by yoshifumi takemoto editing by sam holmes