–April-June Spending Up, Indicating Q2 GDP Rebound led by Consumption
–Real Household Income Falls For 4th Straight Month on Rising Cost of Living
By Max Sato
(MaceNews) – Japan’s real household spending posted the first year-on-year rise in four months in June after falling unexpectedly in May as pent-up demand for eating out and traveling under eased public health restrictions remained strong before the Omicron BA.5 subvariant sparked record numbers of new coronavirus infections across the country in late July, data released Friday by the Ministry of Internal Affairs and Communications showed.
People continued dining out and spending more on leisure after the government ended two months of strict Covid restrictions in late March. An exceptionally early end to the rainy season in late June and a sudden surge in temperatures to record highs for the month also supported demand for summer clothing.
A solid rise in expenditures in April-June compared to a drop in the previous quarter indicates an expected rebound in Japan’s GDP in the second quarter was led by consumption. But in July-September, consumption faces headwinds from a rapid resurgence in Covid cases and high costs for food and energy that are eroding real household incomes.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people rose 3.5% on the year in June, coming in much stronger than the median economist forecast of a 1.5% rise (forecasts ranged from a 0.6% drop to a 2.7% gain). It was the fourth year-on-year rise in the past 12 months, following decreases of 0.5% in May, 1.7% in April and 2.3% in March, a 1.1% rise in February and a 6.9% surge in January.
* The increase in June was led by continued high spending on hotels and domestic package tours as well as train and air fares. Expenditures on groceries (fish and vegetables) dropped on year as households cooked more at home a year earlier during the Covid state of emergency imposed on many regions in the first half of 2021.
* On the month, real average household spending rose a seasonally adjusted 1.5% in June after plunging 1.9% in May, marking the sixth increase in the past 12 months. It was well above the consensus forecast of a 0.1% drop (economist forecasts ranged from a 2.3% fall to a 1.4% rise).
* In the April-June quarter, household spending rose a real 2.0% (a nominal 3.2%) from the previous three-month period, when it dipped a real 1.8% (a nominal 0.7%). Economists expect Japan’s gross domestic product to post a solid rebound in the second quarter as the government eased Covid restrictions and despite the drag from lockdowns in China that exacerbated supply constraints for carmakers and electronics firms.
* The average real income of households with salaried workers fell 1.4% on year in June (up 1.4% in nominal terms) for the third drop in a row after falling 2.7% in May, plunging 3.5% in April and rising 2.3% in March. The annual consumer inflation is above 2% as more firms are passing higher costs onto customers.
* The main bread-earner’s real income in the average household also marked the third straight year-on-year drop, down a real 2.9% (down a nominal 0.2%) after sliding 2.7% (up a nominal 0.1%). By contrast, the average spouse income posted the fifth straight rise, up a real 6.9% (up a nominal 9.9%) following a 1.7% rise (a nominal 4.6%) in May as firms have been raising part-time worker’s wages more than those for full-time employees to meet reopening demand.
Gradual Wage Pickup Continues, Down in Real Terms
The pickup in nominal wages in Japan continued in June while real wages continued falling in the face of elevated food and energy costs, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted the sixth straight year-on-year rise, up a preliminary 2.2% in June after rising 1.0% in May. In real terms, however, average wages dipped 0.4% on year for the third straight drop after falling 1.8%.
Base wages rose 1.3% on year in June, marking the eighth straight gain after rising a revised 1.1% in May. The key indicator for overall wages has been on a modest recovery trend in the past year.