–Spending on Autos Slips After Recent Pickup on Improved Supply Chains
–Traveling, Eating Out Remain Strong in Absence of Covid Restrictions
–Real Household Income Posts 10th Straight Y/Y Drop on Elevated Costs, Despite Rise in Nominal Wages
By Max Sato
(MaceNews) – Japan’s real household spending posted its fifth straight drop on the year in July as high costs for food and other daily necessities have made consumers more frugal while spending more on dining out and traveling in the absence of strict Covid public health rules, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Some households had already purchased electric appliances and furniture in an earlier phase of the pandemic, exerting downward pressures on goods spending. People have also trimmed spending on face masks and fever thermometers after the government lifted many Covid restrictions in May.
Expenditures unexpectedly slumped on the month in July after a modest rebound in June. The heat wave has been a double-edged sword, supporting sales at air conditioned retail stores while having a dampening effect on outdoor leisure facilities.
Both the government and the Bank of Japan have been providing stimulus to help the economy recover fully from the pandemic-caused slump. The output gap has turned positive after two years of staying in negative territory but real wages remain weak. Nominal wages are expected to grow at a fast pace in the current fiscal year amid labor shortages.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people slumped 5.0% on the year in July after slipping 4.2% in June, 4.0% in May, 4.4% in April, 1.9% in March and rebounding 1.6% in February on a 0.3% dip in January. It was much weaker than the median economist forecast of a 2.5% fall (forecasts ranged from 3.5% to 2.3% drops). The decrease was the eighth in 12 months.
* The decline was led by lower spending on home repairs and maintenance compared to a year earlier, when people sent more time at home under tighter public health rules, as well as a pullback in automobiles purchases after a recent pickup on improved supply chains. Those categories tend to fluctuate widely from month to month. Households also spent less on funerals and other rituals as they have simplified the procedures to avoid close contact during the pandemic.
* Households continued spending less on groceries and prepared food, compared to the earlier phase of the pandemic, when households had cooked more at home and bought takeout food to avoid close contact.
* On the upside, households continued spending more on eating out, train and airfares, domestic package tours and hotels amid eased Covid restrictions.
* Compared to the previous month, real average household spending plunged a seasonally adjusted 2.7% in July after rebounding a modest 0.9% in June and following four months of decline. The decrease was the eighth in 12 months. The latest figure was much weaker than the consensus forecast of a 0.7% rise (forecasts ranged from a 0.6 drop to a 1.1% gain).
* The real spending adjusted index (2020 = 100) stood at 96.1 in July, down sharply from 98.9 in June and 97.9 in May. It is the lowest under the current statistical formula dating to January 2020 and just below 96.2 seen in August 2021. The index has drifted down from 99.0 in April, 100.3 in March, 101.1 in February and 103.6 in January (the highest since 104.9 in April 2021).
* The average real income of households with salaried workers posted the 10th straight year-over-year drop, down 6.6% in July (down 3.0% in nominal terms) after falling 5.6% (down a nominal 1.9%) in June. The main bread-earner’s real income in the average household marked the seventh straight year-over-year drop while the average spouse real income posted the third straight drop after recording the first decline in 16 months in May.
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Contact this reporter: max@macenews.com
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