— Oct-Dec Household Spending +4.6% Q/Q; Q4 GDP Seen Up 1.4% Q/Q
— Shrinking Demand for TVs, Food for Cooking Leads To Y/Y Drop in December
— Spending on Dining Out, Traveling Up Y/Y But Ministry Keeps Close Watch
By Max Sato
(MaceNews) – Japan’s household spending suffered a slight drop from a year earlier in December as demand for home entertainment devices and groceries tapered off, but an increase on quarter in the final three months of 2021 supports forecasts of a GDP rebound in October-December, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
The gradual reopening of the economy since Oct. 1, when the government eased Covid restrictions after keeping them in place from July 12 to Sept. 30, allowed people to spend more on dining out and traveling, pushing up consumption in the October-December quarter from July-September, when the Delta variant caused a spike in coronavirus cases.
Looking ahead, however, spending in January may be dampened by the rapid spread of the pandemic triggered by the more contagious Omicron variant, which prompted the government to expand strict restrictions on social and economic activities to 35 of Japan’s 47 prefectures.
The key points from the monthly Family Income and Expenditure Survey on Households:
- Real average spending by households with two or more people edged down 0.2% on year in December, marking the fifth straight year-over-year drop after falling 1.3% in November and coming in weaker than the median economist call of a 0.4% rise.
- December’s slight decline was due to lower spending on TVs and computers as well as fish and vegetables. By contrast, expenditures on dining out, hotels, train fares and highway tolls continued rising from year-earlier levels. November’s drop was caused by lower spending on utilities as more people went out or resumed commuting.
- The ministry maintained its view that spending is “largely flat.” “Demand arising from the stay-at-home lifestyle is decreasing, leading to lower spending on TVs and foodstuffs for cooking,” a ministry official told Mace News. The ministry will “keep a close eye” on the impact of rising Covid cases on consumption, the official said.
- On the month, real average household spending was also lackluster, inching up a seasonally adjusted 0.1% for the first rise in two months after falling 1.2% in November and rising 3.4% in October.
- In the October-December quarter, real average household spending rebounded a seasonally adjusted 4.6% from July-September, when it slumped 4.7%. This indicates a solid increase in private consumption, which accounts for about 55% of the gross domestic product, and thus supports the median economist forecast for a 1.4% rise on quarter (an annualized 5.8%) in the fourth quarter GDP, following a 0.9% (3.6% annualized) contraction in July-September. Q4 GDP data is due on Tuesday, Feb. 15.
- From a year earlier, however, household spending in the October-December quarter dipped 0.7% after falling 1.5% in July-September and rising 7.1% in April-June. Therefore, the ministry sees the trend as “largely flat.”
- For the whole of 2021, real average spending by households with two or more people rebounded 0.7% after slumping 5.3% in 2020 and rising 0.9% in 2019, which was the first annual increase in six years.
- The average real income of households with salaried workers rose 4.6% on year in December, posting the fifth straight gain, with the pace of increase accelerating from 1.1% in November.
- The main bread-earner’s income in the average household marked the ninth consecutive year-on year gain on year in December, up 2.1% (vs. +3.3% in November), while the average spouse income posted the first rise in four months, up 3.0% (vs. -0.5% the previous month).
Average Wages Remain Weak
The pickup in nominal wages paused in Japan in December while real wages continued falling amid rising food and energy costs, data released Tuesday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan fell 0.2% on year in December after jumping 0.8% (revised up from being unchanged) in November. In real terms, average wages slumped 2.2%, posting the fourth straight year-on-year drop after sliding 0.8% (revised up from an initial 1.7% fall) in November.
Base wages rose 0.2% on year in December, marking the second straight gain after rising 0.2% (revised from +0.3%) in November. The key indicator for overall wages has been on a modest recovery trend.
Japanese firms tend to maintain employment during an economic downturn, and this trend has been in place even during the pandemic, which means they don’t have to jack up wages to secure workers as the economy reopens.
Contact this reporter: max@macenews.com
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