–Eating Out Continues Growing; Tuition, Medical Costs Also Up
–Real Household Income Posts 17th Straight Y/Y Drop on Elevated Costs but Up in Nominal Terms
By Max Sato
(MaceNews) – Japan’s real household spending posted its 12th straight drop on the year in February, as mild weather led to lower costs for heating, but the pace of decrease slowed to a 0.5% fall from a 6.3% slump in January, backed by the leap-year effect, data released Friday by the Ministry of Internal Affairs and Communications showed.
Without the boosting effect of having an extra day of consumption in a leap year, spending would have been down by a deeper 2.7%, closer to the median economist forecast of a 3.0% drop. Easing but still elevated living costs have kept consumers frugal and new car purchases remained weak due to suspended vehicle output over a safety test scandal. Partly offsetting lower spending were higher tuition fees and medical costs but these factors are also squeezing households.
On the month, expenditures rose a solid 1.4% for the first increase in five months after falling 2.1% in January. It was much stronger than the median forecast of a 0.3% rise. Generally, consumers are seeking lower prices for goods and services including prevalent discount mobile phone plans while the Covid-era necessity has simplified ceremonies and lowered their costs.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, fell 0.8% on the year in February, similar to the 0.5% dip 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 0.5% on the year in February after falling 6.3% in January and 2.5% in December. The decline was smaller than the median economist forecast of a 3.0% fall (forecasts ranged from 4.6% to 2.0% drops). Mild weather in January led to lower utility bills in February for a second straight month, exerting downward pressures on household spending, but it also shored up demand for spring clothing and formal wear for graduation and entrance ceremonies, which was a slightly positive factor.
* Spending on automobiles and related items was down 2.2% on year in February because supply of new vehicles declined, which in turn slashed spending on car navigation and audio systems. However, purchases of automobiles alone were up 4.6% in light of rising demand for previously owned cars.
* Many people continued spending on eating out while medical costs have risen after the public insurance plan stopped covering Covid-related treatment. Tuition fees rose on year for the second month in a row in February as more students tried to enter university this year ahead of a revamp in the national standardized test scheduled for 2025. In addition, the number of students writing entrance exams for private middle schools surged in some regions, pushing up overall educational costs as seen in private high school exams in January.
* January’s 6.3% drop was the largest decline since the 6.5% drop in February 2021. But it was also due to what ministry officials see as temporary factors. People spent less on tours as the government’s economic stimulus measure to subsidize domestic travel that began in October 2022 wound down toward the end of 2023.
* Compared to the previous month, real average household spending rebounded a seasonally adjusted 1.4% in February after decreases of 2.1% in January, 0.5% in December, 0.5% in November and 0.2% in October and a 0.2% rise in September. The latest figure was much stronger than the consensus forecast of a 0.3% rise (forecasts ranged from a 2.7% drop to a 1.4% gain).
* The average real income of households with salaried workers posted the 17th straight year-over-year drop, down 2.5% in January (but up 0.7% in nominal terms), after a 2.1% fall in January (up a nominal 0.3%). The main bread-earner’s real income in the average household marked the 14th straight year-over-year drop while the average spouse real income posted the first rise in 10 months.
* The Ministry of Health, Labour and Welfare will release February wages data on Monday. Total monthly average cash earnings per regular employee in Japan posted their 25th straight year-on-year rise, up 2.0% in January, but real average wages fell 0.6% on year for the 22nd consecutive drop.