–METI Upgrades View: Retail Sales on Gradual Uptrend Vs. Taking One Step Forward, One Step Back
By Max Sato
(MaceNews) – Japanese retail sales rose 3.0% on year in May, above the consensus call of a 2.0% rise, with the pace of increase accelerating from a downwardly revised 2.0% gain in April, thanks to continued solid department store sales and a smaller drop in vehicle sales, data released Thursday by the Ministry of Economy, Trade and Industry showed.
Strong inbound spending and high demand for luxury brand goods continued to propel department store sales, which also saw higher temperatures boosting sales of seasonal goods. Resumed vehicle production in March after two months of suspension over a safety scandal led to a smaller decline in auto sales.
Retail sales have been above year-earlier levels for a 27th consecutive month, but the pace of increase has slowed from the recent peak of a 7.3% rise in February 2023, which is the highest since the 8.3% increase in May 2021. High costs for daily necessities are hurting consumer sentiment and real wages have been falling for two years.
On the month, retail sales jumped a seasonally adjusted 1.7% on solid department store sales, a rebound in auto sales and higher fuel prices, after rebounding 0.8% (revised down from a 1.2% gain) in April and falling 1.2% in March. It was also stronger than the median forecast of a 0.7% increase.
The METI upgraded its assessment for the first time in 15 months, saying retail sales are “on a gradual uptrend.” In the previous five months, it said sales were “taking one step forward and one step back.” The three-month moving average in seasonally adjusted retail sales rose 0.4% on the month in May for the fourth straight monthly gain after rising 0.5% in April.
Details from the METI’s Current Survey of Commerce:
* Sales of automobiles fell 3.3% on year in May but the pace of decline eased from decreases of 10.6% in April, 15.4% in March and 4.0% in January, which was the first drop in 20 months. Sales of machinery and equipment (largely consumer electronics) rose 5.3% on higher demand for smartphones, marking the 11th straight increase after rising 8.0% in April, when hot weather led sales of air conditioners.
* Sales of food and beverages, a category which has the largest share in retail sales, posted their 20th straight rise, up 1.0%, after rising 1.5% the previous month.
* General merchandise sales at department stores and supermarkets marked the 27th straight year-over-year gain, up 5.4%, after rising 2.1%. The pace of increase has slowed from 6.2% in March and 8.3% in February. Sales of apparel and accessories edged down 0.3% for a sixth straight drop after falling 1.0% in the previous month. Temperatures were high but there were more rainy days in the latter half of May, dampening sales of summer clothing at some stores.
* Sales of fuels rose 4.5% for the seventh straight year-on-year increase after rising 4.7%, reflecting higher gasoline prices.
* Demand for medicine and cosmetics remained solid, up 5.1%, after a 6.3% gain in the prior month.
Department Store Sales Remain Solid, Led by Inbound Demand
Industry data released this week showed department store sales marked the 27th straight year-over-year rise in May, up 14.4% at ¥469.2 billion, following increases of 8.9% in April, 9.9% in March, 14.0% in February and 7.1% in January. Sales last month were also up 8.9% from the pre-pandemic May 2019.
The Japan Department Stores Association said strong inbound spending as well as high demand for luxury brands, art and jewelry continued to lead overall sales. Higher temperatures propped up sales of summer clothing and other seasonal goods including sunglasses and folding fans, it said. Family and food events for the Golden Week holidays in early May and Mothers’ Day also helped boost sales.
Spending by foreign visitors surged 231.2% on the year to a fresh record high of ¥71.8 billion, beating the previous record of ¥59.9 billion hit in April. It was 132.4% above the level seen in May 2019, surpassing the pre-pandemic levels for the 11th straight month. There were more visitors from China due to its Labor Day holidays from May 1 to May 5.