–METI Upgrades View: Retail Sales on Gradual Uptrend Vs. Picking Up
–Department Store Sales on Recovery Track, Auto Sales Improving
–Demand for Cosmetics, Drugs Remains Solid; Sales of Appliances Stay Weak
By Max Sato
(MaceNews) – Japanese retail sales posted their 11th straight year-on-year increase in January, with the pace of increase above forecast and accelerating from December, as the economy continued to reopen amid easing fears about the impact of the recent spike in new Covid cases, data released Tuesday by the Ministry of Economy, Trade and Industry showed.
Sales marked a solid gain on the month in January, also coming in stronger than expected, as colder weather supported demand for winter clothing and the supply of automobiles continued improving.
Consumer spending on goods has been solid while expenditures on services have been supported by the government’s domestic travel discount program, which was launched in October and resumed in January on a smaller scale after a brief suspension during the yearend and New Year holidays.
The monthly Economy Watchers Survey, which was conducted by the Cabinet Office from Jan. 25 to Jan. 31 and released on Feb. 8, indicated that confidence remained weak in January, hit by severe winter weather and rising costs, but the outlook was more positive on expectations that the pandemic will ease in a few months after a recent spike and that firms will raise wages for fiscal 2023.
The key points from the METI’s Current Survey of Commerce:
- Retail sales jumped a preliminary 6.3% on the year in January for the 11th straight year-over-year rise after rising 3.8% in December, 2.5% in November and 4.4% in October. The increase was much higher than the median economist forecast of a 4.1% rise (forecasts ranged from 3.3% to 5.5% gains). It was the fastest rise since the 8.3% increase in May 2021.
- The government plans to downgrade its classification of Covid-19 on May 8 from a level similar to the strict Class 2 category, which includes tuberculosis, to something closer to Class 5, which includes the seasonal flu. After the initial Omicron variant storm in February 2022, the government eased public health restrictions in March and has continued reopening the economy. It lifted strict its Covid border control in October, leading to a pickup in spending by visitors from other countries.
- Sales of automobiles surged 19.3% on year in January after edging up 0.4% in December and following gains of 6.1% in November, 12.2% in October and 10.2% in September, which was the first year-on-year rise in 13 months. Sales of food and beverages, which have the largest share in retail sales, posted their fourth straight rise, up 5.4%, after a 3.2% gain the previous month.
- General merchandise sales at department stores and supermarkets marked the 11th straight year-on-year gain, up 8.9% in January, following increases of 3.9% in December, 2.9% in November and 6.6% in October. Sales of apparel and accessories rose 4.8% after rebounding a modest 0.8% in December, falling 8.8% in November and rising 4.6% in October.
- Sales of fuels rose just 0.7% on the year in January after rebounding 3.0% in December amid freezing temperatures across the country and record snowfall in some regions. Fuel sales fell 2.6% in November and rose 1.6% in October. The pace of increase had slowed from a recent peak of 28.9% in November 2021 in line with softer energy prices. The government is also trying to cap retail gasoline price markups by providing subsidies to refineries.
- Demand for medicine and cosmetics remained solid, up 7.5% in January, for the 21st straight increase, after surging 15.9% in December and rising 12.1% in November. By contrast, sales of machinery and equipment (largely consumer electronics) marked their fourth straight year-on-year drop, down 3.2%, after decreases of 3.7% in December, 2.9% in November and 1.0% in October.
- On the month, retail sales surged 1.9% on a seasonally adjusted basis in January after rising 1.1% in December and marking their first drop in five months in November, down 1.3%, and rising 0.3% in October. The latest figure was stronger than the median forecast of a 0.4% fall (forecasts ranged from a 1.1% drop to a 1.4% rise).
- The ministry upgraded its assessment, saying retail sales are “on a gradual uptrend.” Previously, it had said retail sales were “picking up.” It noted that the three-month moving average in seasonally adjusted retail sales rose 0.6% in January for a sixth straight gain after rising 0.1% in the previous two months.
Department Store Sales Stay on Track
Industry data released last week showed department store sales marked the 11th straight year-over-year rise in January, up 15.1%, after rising 4.0% in December, 4.5% in November, 11.4% in October, 20.2% in September and 26.1% in August. Sales were down 6.2% (down 2.1% in December) from January 2020, when there were remaining dampening effects of the sales tax hike to 10% from 8% in October 2019. Compared to the pre-pandemic January 2019, last month’s sales were down 9.5% (down 7.0% in December).
The Japan Department Stores Association noted that New Year’s sales drew more people in the absence of strict public health rules while low temperatures supported demand for winter clothing and other seasonal goods. The relatively weak yen and relaxed Covid border rules continued to boost spending by foreign visitors, up 331.5% on the year after a 484.7% surge in December, but it remained 39.1% below the level seen in January 2020, when the drag from the pandemic was limited.
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Contact this reporter: max@macenews.com
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