By Max Sato
(MaceNews) – Japan’s household spending in September continued to slump from a year earlier, hit by the October 2019 sales tax hike and the global pandemic, but a quarter-on-quarter gain indicates consumption supported solid GDP growth after a third consecutive contraction through April-June, data released Friday by the Ministry of Internal Affairs and Communications showed.
The key points from the monthly Family Income and Expenditure Survey on
Households:
* Real average spending by households with two or more people posted the
12th straight year-on-year drop in September, down 10.2%, largely in line with the median economist forecast of a 10.6% fall. The pace of decrease accelerated from the 6.9% decline in August in reaction to the 9.5% surge on rush purchases seen a year earlier before the consumption tax was raised to the current 10% from 8% on Oct. 1, 2019.
SUPPORTING Q3 GDP REBOUND
* In the July-September quarter, real average household spending slumped 8.3% on year, with the pace of decline decelerating from -9.8% in April-June. On quarter, real spending rose a seasonally adjusted 3.6% in Q3, indicating a positive contribution to Japan’s economic growth in the three-month period.
* Economists expect the Q3 GDP to show a rebound around 4% on quarter (about 18% on an annualized basis), recovering only half of a 7.9% plunge on quarter in Q2, or an annualized 28.1%, which was a third straight contraction. Consumption and net exports are estimated to have supported growth while business investment appears to have remained weak.
COVID-19 LIMITS SPENDING
* The September decrease in spending was led by continued declines in domestic holiday tours, commuting and dining out. Purchases of durable goods, such as refrigerators and washing machines, marked the first y/y drop in five months.
* On the upside, restrictions on economic activity during the pandemic have led many households to continue spending more on some foodstuffs (meat) to cook at home, instead of eating out.
* On the month, real average household spending rose 3.8% in September, marking the second straight m/m rise following +1.7% in August and -6.5% in July.
* The average real income of households with salaried workers recorded the ninth consecutive year-on-year increase, up 2.6% in September after rising 1.2% in August.