–METI Keeps View After Last Month’s Downgrade: Retail Sales Taking One Step Forward, One Step Back
By Max Sato
(MaceNews) – Japanese retail sales in January moderated slightly to a 2.3% gain on the year after increases of 2.4% in December and 5.4% in November, as sales of vehicles and clothing lost more steam after recent gains and easing inflation continued lowering the values of foodstuffs and fuels, data released Thursday by the Ministry of Economy, Trade and Industry showed. The consensus forecast was a 2.0% rise.
On the month, retail sales rose a seasonally adjusted 0.8%, shy of the median forecast of a 1.2% increase, after plunging an upwardly revised 2.6% in December, when relatively mild weather dampened demand for winter clothing and heaters. A cold snap in November had boosted sales of those items.
The number of visitors from other countries has recovered to pre-Covid levels, supporting retailers. The year-over-year increase in department store sales picked up after slowing in December, but looking ahead, sharp gains are unlikely as sales have already recovered from the pandemic slump and pent-up demand has waned.
The METI maintained its assessment after downgrading it last month, saying retail sales are “taking one step forward and one step back.” Previously, sales were “on an uptrend.” The three-month moving average in seasonally adjusted retail sales slipped 0.2% on the month in January for the third straight drop after slumping 1.1% in December.
The government said its monthly economic report last week that Japan still needs monetary and fiscal stimulus and growth strategies to keep itself from falling back into deflation, repeating its request first made in May 2022 that the Bank of Japan should “achieve the price stability target of 2% in a sustainable and stable manner, accompanied by wage increase.”
The key points from the METI’s Current Survey of Commerce:
* Retail sales rose a preliminary 2.3% on the year in January for the 23rd straight year-over-year rise after rising 2.4% (revised up from 2.1%) in December and climbing 5.4% in November. It was higher than the median economist forecast of a 2.0% rise (forecasts ranged from 0.7 to 3.2 gains). The latest pace of increase is the lowest since 1.5% recorded in June 2022, well below the recent peak of a 7.3% rise in February 2023, which is the highest since the 8.3% increase in May 2021.
* On the month, retail sales rose 0.8% on a seasonally adjusted basis in January, following a 2.6% slump (revised up from a 2.9% fall) in December and a 1.1% rebound in November. It was weaker than the median forecast of a 1.2% rise (forecasts ranged from 0.4% to 1.8% gains).
* Sales of automobiles fell 3.5% on year in January for the first drop in 17 months, after rising 5.2% in December. Sales of machinery and equipment (largely consumer electronics) rose 1.9% in January for the seventh increase in a row after rising 5.9% previously.
* Sales of food and beverages, a category which has the largest share in retail sales, posted their 16th straight rise, up 4.0%, after rising 3.6% the previous month. Sales prices had been marked up to reflect high import costs earlier but the pace of goods price increases has peaked in CPI data.
* General merchandise sales at department stores and supermarkets marked the 23rd straight year-over-year gain, up 3.5% in January, after rising 2.2% in December. Sales of apparel and accessories fell 8.3% for the second straight drop after slumping 13.5% in the previous month.
* Sales of fuels edged up 0.7% on the year in January after rising 0.9% in December and 3.9% in November. Retail gasoline prices in Japan hit a record high in early September, followed by a gradual slowdown until late October, a slight uptick through early January and a mild pullback. The government has scaled back subsidies to refineries.
* Demand for medicine and cosmetics remained solid, up 5.4% in January, after a 2.5% gain in December.
Department Store Sales Show Clear Recovery
Industry data released last week showed department store sales marked the 23rd straight year-over-year rise in January, up 7.1% at ¥459.3 billion, following increases of 5.4% in December, 7.4% in November, 6.1% in October and 9.2% in September. Sales last month were up 0.2% from the pre-pandemic January 2020, staying on a recovery trend.
The Japan Department Stores Association said sales were supported by strong inbound spending, continued high demand for luxury brands and increased foot traffic in the absence of Covid public health restrictions.
The weak yen continued pushing up spending by foreign visitors, which rose 105.9% on the year to ¥39.9 billion, after hitting a record high for the third straight month in December. It was 25.7% above the level seen in January 2020, showing a steady recovery from the pandemic slump.