–Eating Out Continues; Demand for Automobiles Solid on Improved Supply Chains, Easing Chip Shortages
–Real Household Income Posts 13th Straight Y/Y Drop on Elevated Costs; Nominal Wage Growth Falling Behing Inflation
By Max Sato
(MaceNews) – Japan’s real household spending posted its eighth straight drop on the year in October, down a smaller-than-expected 2.5%, after a 2.8% dip in September, as high costs for daily necessities promoted many to remain frugal and the lingering heat wave damped demand for autumn clothing and heaters, data released Friday by the Ministry of Internal Affairs and Communications showed.
On the month, expenditures dipped just 0.1%, firmer than expected, after edging up 0.3% in September and rebounding 3.9% in August. Pent-up demand for eating out and traveling had already shown slower momentum in the previous month.
The widespread move among consumers to switch to discount mobile phone plans remains intact while the pandemic-era necessity to simplify weddings and funerals continued to push down costs for ceremonies, which was the largest contributor to the year-over-year drop in overall spending.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people fell 2.5% on the year in October after falling 2.8% in September, 2.5% in August, 5.0% in July, 4.2% in June, 4.0% in May, 4.4% in April, 1.9% in March and rebounding 1.6% in February on a 0.3% dip in January. It was firmer than the median economist forecast of a 3.0% fall (forecasts ranged from 4.3% to 1.8% drops). The decline was led by lower spending on weddings and funerals, durable goods (heaters due to warm weather) and fresh vegetables (high costs as the wave hurt crops).
* Compared to the previous month, real average household spending fell a seasonally adjusted 0.1% in October after rising 0.3% in September, surging 3.9% in August, plunging 2.7% in July and rebounding a modest 0.9% in June. The latest figure was firmer than the consensus forecast of a 0.6% fall (forecasts ranged from a 1.4 drop to a 0.9% gain).
* Many households continued spending less on groceries and prepared food, compared to the earlier phase of the pandemic, when they had cooked more at home and bought takeout food to avoid close contact. They are also being frugal as food costs remain high.
* On the upside, households continued spending on eating out and traveling, thanks to eased Covid restrictions. Purchases of automobiles have also risen in recent months, thanks to improved supply chains and eased semiconductor shortages.
* The average real income of households with salaried workers posted the 13th straight year-over-year drop, down 5.2% in October (down 1.5 in nominal terms) after falling 5.8% in September (down a nominal 2.4%). The main bread-earner’s real income in the average household marked the 10th straight year-over-year drop while the average spouse real income posted the sixth straight drop after recording the first decline in 16 months in May.
Real Wage Drop Continues; Nominal Base Wages Post Solid Gain
The pickup in nominal wages in Japan continued for nearly two years while real wages fell on the year for the 19th straight month, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 22nd straight year-on-year rise, up a preliminary 1.5% in October, after rising 0.6% (revised down from 1.2%) in September, 0.8% in August, 1.1% in July, 2.3% in June and 2.9% in May. The recent slower pace was due to a decline in bonuses and other special pay for the second straight month in September as well as no growth in overtime pay in July.
Base wages rose a solid 1.4% on year, marking the 24th straight gain, after rising a revised 1.0% in September. The pace of increase has accelerated moderately in recent months from 0.5% in March as many firms are raising wages to secure workers. The key indicator for overall wages has been on a recovery trend.
In real terms, average wages fell a preliminary 2.3% on year in October for the 19th consecutive drop after falling 2.9% (revised down from a 2.4% decline) in September, 2.8% in August, 2.7% in July, 1.6% in June and 0.9% in May. To calculate real wages, the ministry uses the overall consumer price index minus the structurally weak owners’ equivalent rent, which rose 3.9% on year in October after rising 3.6% in September. Consumer inflation in Japan picked up slightly in two of the three key measures in October as reduced subsidies for electricity and natural gas utilities slowed the sharp drop in overall energy costs and hotel fees jumped on pent-up demand, more than offsetting the effects of smaller processed food markups, data from the Ministry of Internal Affairs and Communication released last month showed