–METI Upgrades View for 2nd Straight Month: Retail Sales on Uptrend Vs. Gradual Uptrend
By Max Sato
(MaceNews) – Japanese retail sales rose 3.7% on year in June, above the consensus call of a 3.0% rise, with the pace of increase accelerating from a downwardly revised 2.8% gain in May, thanks to a delayed rainy season and the lingering heat wave that kept demand for air conditioners and other seasonal goods high, data released Wednesday by the Ministry of Economy, Trade and Industry showed.
Strong inbound spending and high demand for luxury brand goods continued to drive department store sales higher. Resumed vehicle production in March after two months of suspension over a safety scandal led to smoother deliveries and thus a smaller decline in auto sales.
Retail sales have been above year-earlier levels for the 28th consecutive month, but the pace of increase has slowed from the recent peak of a 7.3% rise in February 2023, which is the highest since the 8.3% increase in May 2021.
High costs for daily necessities and more than two years of decline in real wages are keeping many households frugal but weekly alternative data shows consumer spending has edged up and consumer sentiment has picked up since late June on hopes of positive effects of an income tax cut that is being processed for the summer.
On the month, retail sales rose a seasonally adjusted 0.6% on solid department store sales, strong demand for summer clothing and a second straight monthly rise in auto sales. Those factors more than offset lower sales of fuels and drugs/cosmetics. It was the third consecutive increase following a 1.1% gain (revised down from a 1.7% jump) in May and a 0.8% rebound in April, coming in stronger than the median forecast of a slight 0.1% rise.
The METI upgraded its assessment for the second month in a row, saying retail sales are “on an uptrend.” Last month it said they were “on a gradual uptrend” in its first upgrade in 15 months. Previously, sales were “taking one step forward and one step back.” The three-month moving average in seasonally adjusted retail sales rose 1.0% on the month in June for the fifth straight monthly gain after rising 0.4% in May.
Details from the METI’s Current Survey of Commerce:
* Sales of automobiles fell 1.6% on year in June but the pace of decline eased further from decreases of 3.8% in May, 10.6% in April, 15.4% in March and 4.0% in January, which was the first drop in 20 months. Sales of machinery and equipment (largely consumer electronics) jumped 10.1% on higher demand for air conditioners, marking the 12th straight increase after rising 4.7% in May on smartphones.
* Sales of food and beverages, a category which has the largest share in retail sales, posted their 21st straight rise, up 2.4%, following gains of 1.3% in May, 1.5% in April, 3.5% in March and 6.0% in February.
* General merchandise sales at department stores and supermarkets marked the 28th straight year-over-year gain, up 7.7%, after rising 5.4% in May, 6.2% in March and 8.3% in February. Sales of apparel and accessories rose 4.7% for the first increase in 10 months on higher demand for seasonal goods after edging down 0.2% in the previous month, when many rainy days in the latter half of May dampened summer clothing sales at some stores.
* Sales of fuels rose 4.7% for the eighth straight year-on-year increase after rising 5.1%, reflecting higher gasoline prices.
* Demand for medicine and cosmetics remained solid, up 3.1%, after a 4.9% gain in the prior month.
Department Store Sales Remain Solid Led by Inbound Demand
Industry data released this week showed department store sales marked the 28th straight year-over-year rise in June, up 14.0% at ¥501.8 billion, following increases of 14.4% in May, 8.9% in April, 9.9% in March, 14.0% in February and 7.1% in January. Sales last month were also up 8.2% from the pre-pandemic June 2019.
The Japan Department Stores Association said unusually many sunny days thanks to the late start to the rainy season prompted people to go out, boosting demand for summer items. Inbound spending as well as demand for luxury brands remained strong, it said. Mid-summer gift-giving practice also supported overall sales.
Spending by foreign visitors rose 135.5% on the year to of ¥66.1 billion in June, the second highest on record, after surging 231.2% to a fresh record high of ¥71.8 billion in May. It was 133.8% above the level seen in June 2019, surpassing the pre-pandemic levels for the 12th straight month.