–METI Downgrades View: Retail Sales Taking One Step Forward, One Step Back Vs. on Uptrend
–Department Store Sales Up but at Slower Pace after Already Recovering from Pandemic Slump
By Max Sato
(MaceNews) – Japanese retail sales turned weaker in December, rising just 2.1% on the year, below the consensus forecast of a 5.3% rise and slowing from a revised 5.4% gain in November, as demand for clothing slipped, vehicle sales slowed and easing inflation put a damper on values of foodstuffs and fuels, data released Wednesday by the Ministry of Economy, Trade and Industry showed.
On the month, retail sales plummeted a seasonally adjusted 2.9%, versus the median forecast of a 0.5% dip, after rebounding a revised 1.1% in November and slumping 1.7% in October. Demand for winter clothing stabilized after a jump in the previous month, when a cold snap replaced months of warm weather.
The number of visitors from other countries has recovered to pre-Covid levels, generally supporting the retail and tourism industries, but the year-over-year increase in department store sales has decelerated as they have already recovered from the pandemic slump and pent-up demand has waned.
The METI downgraded its assessment, saying retail sales are “taking one step forward and one step back.” Previously, it had said sales were “on an uptrend.” The three-month moving average in seasonally adjusted retail sales slumped 1.2% on the month in December for a third straight drop.
The government said its monthly economic report last week that Japan still needs monetary and fiscal stimulus and growth strategies to keep itself from falling back into deflation, repeating its request first made in May 2022 that the Bank of Japan should “achieve the price stability target of 2% in a sustainable and stable manner, accompanied by wage increase.”
The key points from the METI’s Current Survey of Commerce:
* Retail sales rose a preliminary 2.1% on the year in December for the 22nd straight year-over-year rise after rising 5.4% (revied up from 5.3%) in November and 4.1% in October. It was much lower than the median economist forecast of a 5.0% rise (forecasts ranged from 4.0% to 5.7% gains). The 7.3% rise in February 2023 remains the highest since the 8.3% increase in May 2021.
* On the month, retail sales plunged 2.9% on a seasonally adjusted basis in December, following a revised 1.1% rise (revised up from a 1.0% gain) in November and a 1.7% dip in October. It was much weaker than the median forecast of a 0.5% decrease (forecasts ranged from 1.1% to 0.5% drops).
* In the final quarter of 2023, retail sales fell a seasonally adjusted 1.7% on quarter after rising 2.5% in July-September and 0.5% in April-June. For the whole of calendar 2023, retail sales rose 5.6% on year following increases of 2.6% in 2022 and 1.9% in 2021, showing a continued pickup from the pandemic-caused slump.
* Sales of automobiles rose 5.3% on year in December for the 16th straight gain, with the pace of increase slowing from 10.8% in November. Sales of machinery and equipment (largely consumer electronics) rose 4.9% in December for the sixth increase in a row after surging 10.8% previously.
* Sales of food and beverages, a category which has the largest share in retail sales, posted their 15th straight rise, up 2.9%, after rising 5.8% the previous month. Sales prices had been marked up to reflect high import costs earlier but the pace of goods price increases has peaked in the latest CPI data.
* General merchandise sales at department stores and supermarkets marked the 27th straight year-over-year gain, up 2.2% in December, after rising 4.6% in November. Sales of apparel and accessories slumped 13.5% for the third drop in four months after being flat in the previous month.
* Sales of fuels rose 1.0% on the year in December after rising 3.9% in November and falling 1.2% in October. Retail gasoline prices in Japan hit record highs from late August to early September, followed by a gradual slowdown and a slight uptick through early January. The government has scaled back subsides to refineries.
* Demand for medicine and cosmetics remained solid, up 2.4% in December, after a 3.7% gain in November.
Department Store Sales Show Clear Recovery
Industry data released on Monday showed department store sales marked the 22nd straight year-over-year rise in December, up 5.4% at ¥646.5 billion, following higher increases of 7.4% in November, 6.1% in October and 9.2% in September. Sales last month were up 3.2% from the pre-pandemic December 2019, staying on a recovery trend.
The Japan Department Stores Association said the first year-end sales since Covid rules were widely eased drew many shoppers for luxury brands, winter clothing and cosmetics.
The relatively weak yen continued pushing up spending by foreign visitors, which rose 122.6% on the year to ¥47.7 billion, hitting a record high for the third straight month (this category dates back to October 2014). It was 58.4% above the level seen in December 2019, showing a clear recovery from the impact of the pandemic on inbound demand.