–Expenditures Rebound in Q2 But Still Sluggish Amid COVID Restrictions
By Max Sato
(MaceNews) – Japan’s household spending lost some steam in June amid restrictions on economic activity aimed at slowing the spread of the pandemic and in reaction to high purchases of appliances a year earlier spurred by COVID-19 cash handouts, data released Friday by the Ministry of Internal Affairs and Communications showed.
Expenditures rebounded in the April-June period both on year and quarter, but the Q2 gross domestic product, due on Aug. 16, is expected to post only a modest growth on quarter after slumping in Q1, as private consumption remains sluggish.
Spending on goods continued growing above 2019 levels in June while expenditures on services remained below those levels, other data have shown. As some Japanese regions gradually eased restrictions, spending on movies and concerts increased, while heavy rains dented some consumption.
In June, the government eased some restrictions on economic activity in Tokyo and other prefectures, but decided to retain slightly less strict COVID-19 emergency measures until July 11. Bars and restaurants in those areas were still required to close by 8 p.m. They could now serve alcohol but must stop by 7 p.m., the same rule set by the government earlier this year.
The key points from the monthly Family Income and Expenditure Survey on Households:
Real average spending by households with two or more people slumped 5.1% on year, marking the first y/y drop after surging 11.6% in May. The key indicator of consumption came in much weaker than the median economist forecast of a 0.1% rise.
The decrease was led by lower spending on home appliances (air conditioners, washing machines) and clothing, compared to a year earlier, when temperatures were higher and many households used extra cash from the government.
In contrast, households spent more on domestic leisure travelling, admissions to theaters for movies and plays, dental treatment and massage fees, and takeout food, following easing of restrictions in some regions.
“Household spending fell in June largely in reaction to a temporary increase in June last year, but coronavirus infections are still having a major impact and we must watch the situation closely,” a ministry official said.
On the month, real average household spending dipped a seasonally adjusted 3.2%, marking the second consecutive m/m drop after -2.1% in May and +0.1% in April. The pace of decline was worse than the median economist forecast of a 2.0% decrease.
From a year earlier, spending in the April-June quarter rebounded a real 6.3%, the first y/y rise in two quarters after falling 2.0% in January-March. This was partly due to a sharp 9.8% drop in April-June 2020 (-3.5% in January-March 2020).
In the second quarter, household spending rose a real 3.0% on quarter on a seasonally adjusted basis, the first q/q rise in two quarters after falling 3.9% in Q1 and rising 4.1% in Q4. But expenditures excluding those on housing showed a smaller 2.3% rebound in Q2 after a 4.3% slump in Q1, indicating that private consumption’s contribution to the total domestic output was nearly flat in April-June.
The average real income of households with salaried workers fell 11.5% on year in June, posting the second straight y/y fall after slipping 2.6% in May, but this is due to a sharp drop in “special income,” compared to May and June 2020, when many individuals received a one-time cash handout worth Y100,000 (about $910) from the government as part of its stimulus measure to ease the pain of the first wave of the global pandemic. The main bread-earner’s income in the average household marked the third consecutive gain on year in June, up 6.1%. The average spouse income also rose for the third month in a row, up 0.1%, after +1.4% in May.
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Contact this reporter: max@macenews.com.
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