JP: Household Spending

Mon Aug 28 18:30:00 CDT 2017

Consensus Actual Previous
Year over Year 0.6% -0.2% 2.3%
Month over Month -1.9% 1.5%

Household spending in Japan, in real terms, fell 0.2 percent on the year in July after increasing by 2.3 percent in June, weaker than the consensus forecast for an increase of 0.6 percent. Spending, in seasonally adjusted real terms, fell 1.9 percent on the month in July after rising 1.5 percent in June.

The main factor driving down headline growth was weaker spending on housing. This fell by 4.6 percent in real terms on the year in July, partly reversing a large increase of 25.1 percent June. Officials attributed the strength in house spending in June in part to a surge in home renovation spending due to lower than usual rainfall during the month. Spending on other major categories was mixed, with year-on-year growth strengthening for fuel, light and water charges, clothing and footwear, furniture and household utensils, and transportation and communication, but weakening for food, medical care and eduction.

Excluding the impact of this weaker spending on housing, underlying consumption and income growth both saw some improvement in July. A measure of core household spending - which excludes housing, motor vehicles and other volatile items and tends to track more closely the consumption component of gross domestic product - showed a stronger year-on-year increase of 0.5 percent in July, up from 0.1 percent in June. This measure has been in negative territory for all but five months since mid-2015 but has now been in positive territory for consecutive months for the first time since then. This measure fell 0.4 percent on the month seasonally adjusted, after an increase of 0.5 percent in June.

Average monthly income per household was around Y598,000 in July, up 3.5 percent in real terms on the year in July, accelerating from real growth of just 0.1 percent in June, and the strongest increase since July 2015.

Household Spending is an important gauge of personal consumption, which accounts for roughly 55 percent of Japan's gross domestic product. It is part of the monthly Family Income and Spending Report.

The report looks at spending of households and gives a picture of consumer spending. Increases in household spending are favorable for the Japanese economy because high consumer spending generally leads to higher levels of economic growth. Higher spending is also a sign of consumer optimism, as households confident in their future outlook will spend more. The preferred number is the change from the previous year. The data are part of the family income and expenditure survey which is released at the same time as the employment and unemployment data.