| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -0.4% | -1.3% to 0.3% | -0.9% | 1.1% |
| Year over Year | 0.5% | -0.8% to 1.0% | -1.2% | 1.2% |
Highlights
Japan's real household spending was sluggish both on the month and year in November as many families saw their purchasing power eroded by a relentless series of markups in food, utilities and durable goods, while people continued spending on domestic travel, aided by the government's discount program, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Spending unexpectedly fell on the year but that was largely due to two temporary factors: Mild weather dampened demand for winter clothing, heaters and blankets; Mobile and landline phone charges dropped, compared to November 2021, when bill payments were made for both October and November (the last two days of October 2021 fell on a weekend and thus charges for that month were carried over).
Many Japanese regions had plunged into the eighth wave of the pandemic by late November, with new Covid cases and death tolls rising fast toward the year-end holiday season and clouding the prospects for consumption growth in the final quarter of 2022.
Real wages marked the sharpest drop in over eight years as consumer inflation is surging and small businesses, which employ about 70 percent of the Japanese workforce, cannot afford to offer sharp salary increases to match price hikes.
The Econoday Consensus Divergence Index stood at minus 16, below zero, which indicates the Japanese economy is performing worse than expected. Excluding the impact of inflation, the index was at minus 13.
Real average spending by households with two or more people fell 1.2 percent on the year in November, coming in much weaker than the median economist forecast of a 0.5 percent rise (forecasts ranged from a 0.8 percent drop to a 1.0 percent gain). It was the first year-over-year drop in six months and the fifth in the past 12 months. It followed increases of 1.2 percent in October, 2.3 percent in September, 5.1 percent in August, 3.4 percent in July and 3.5 percent in June. August's 5.1 percent gain was the largest since expenditures surged 6.9 percent in January 2022.
Without the one-off factors of the unusually mild weather and the irregularity in phone bill payments seen a year earlier, real spending is estimated to have fallen just 0.4 percent on the year, a ministry official said."We see the core trend of household spending as being flat," he said.
The decrease in November was led by lower spending on communications, which pushed down overall expenditures by 0.82 percentage point as well as fresh fish and clothing (winter coats), each making a negative contribution of 0.29 point. The recent trend is that people are spending less on groceries, particularly fish, as households had cooked more at home in the previous year. The Covid state of emergency was imposed on many regions from early January to mid-March in 2021 and from late April until late September that year.
By contrast, spending on domestic package tours, hotels and air/land transportation remained on the uptrend. Even compared to the pre-pandemic November 2019, spending on accommodations rose 30.3 percent in November after soaring 52.6 percent in October and dipping 9.6 percent in September. But spending on train fares dipped 14.2 percent on levels seen three years earlier, following an 8.0 percent rebound in October and a 28.2 percent drop in the prior month.
On the month, real average household spending fell a seasonally adjusted 0.9 percent in November after rising 1.1 percent in October, rebounding 1.8 percent in September and following decreases of 1.7 percent in August and 1.4 percent in July. It was the sixth decrease in the past 12 months and weaker than the consensus forecast of a 0.4 percent fall (economist forecasts ranged from a 1.3 percent dip to a 0.3 percent rise).
Real Wages Slump; Gradual Pickup in Nominal Base Wages Intact
The gradual pickup in nominal wages in Japan continued while the drop in real wages accelerated as the prices for daily necessities remain on the uptrend, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 11th straight year-on-year rise but the pace of increase decelerated to a preliminary 0.5 percent in November after rising 1.4 percent (revised down from 1.8 percent) in October and 2.2 percent in September. It was the weakest figure since December 2021, when total earnings fell 0.4 percent.
In real terms, average wages plunged a preliminary 3.8 percent on year for the eighth straight drop after falling 2.9 percent (revised down from a 2.6 percent drop) in October and 1.2 percent in September. It was the deepest drop since the 4.1 percent slump recorded in May 2014, when consumer inflation was temporarily boosted to above 3 percent after the sales tax was raised to 5 percent from 3 percent in the previous month.
To calculate real wages, the ministry uses the overall consumer price index minus owners' equivalent rent, which surged 4.5 percent on year in November after a similarly sharp 4.4 percent rise in October. It was well above the 3.8 percent rise in total CPI and the 3.7 percent gain in core CPI (excluding fresh food) for November.
Base wages rose 1.5 percent on year in November, marking the 13th straight gain after rising 1.0 percent (revised down from 1.3 percent) in October and 1.4 percent in September. The key indicator for overall wages has been on a modest recovery trend this year.
Spending unexpectedly fell on the year but that was largely due to two temporary factors: Mild weather dampened demand for winter clothing, heaters and blankets; Mobile and landline phone charges dropped, compared to November 2021, when bill payments were made for both October and November (the last two days of October 2021 fell on a weekend and thus charges for that month were carried over).
Many Japanese regions had plunged into the eighth wave of the pandemic by late November, with new Covid cases and death tolls rising fast toward the year-end holiday season and clouding the prospects for consumption growth in the final quarter of 2022.
Real wages marked the sharpest drop in over eight years as consumer inflation is surging and small businesses, which employ about 70 percent of the Japanese workforce, cannot afford to offer sharp salary increases to match price hikes.
The Econoday Consensus Divergence Index stood at minus 16, below zero, which indicates the Japanese economy is performing worse than expected. Excluding the impact of inflation, the index was at minus 13.
Real average spending by households with two or more people fell 1.2 percent on the year in November, coming in much weaker than the median economist forecast of a 0.5 percent rise (forecasts ranged from a 0.8 percent drop to a 1.0 percent gain). It was the first year-over-year drop in six months and the fifth in the past 12 months. It followed increases of 1.2 percent in October, 2.3 percent in September, 5.1 percent in August, 3.4 percent in July and 3.5 percent in June. August's 5.1 percent gain was the largest since expenditures surged 6.9 percent in January 2022.
Without the one-off factors of the unusually mild weather and the irregularity in phone bill payments seen a year earlier, real spending is estimated to have fallen just 0.4 percent on the year, a ministry official said."We see the core trend of household spending as being flat," he said.
The decrease in November was led by lower spending on communications, which pushed down overall expenditures by 0.82 percentage point as well as fresh fish and clothing (winter coats), each making a negative contribution of 0.29 point. The recent trend is that people are spending less on groceries, particularly fish, as households had cooked more at home in the previous year. The Covid state of emergency was imposed on many regions from early January to mid-March in 2021 and from late April until late September that year.
By contrast, spending on domestic package tours, hotels and air/land transportation remained on the uptrend. Even compared to the pre-pandemic November 2019, spending on accommodations rose 30.3 percent in November after soaring 52.6 percent in October and dipping 9.6 percent in September. But spending on train fares dipped 14.2 percent on levels seen three years earlier, following an 8.0 percent rebound in October and a 28.2 percent drop in the prior month.
On the month, real average household spending fell a seasonally adjusted 0.9 percent in November after rising 1.1 percent in October, rebounding 1.8 percent in September and following decreases of 1.7 percent in August and 1.4 percent in July. It was the sixth decrease in the past 12 months and weaker than the consensus forecast of a 0.4 percent fall (economist forecasts ranged from a 1.3 percent dip to a 0.3 percent rise).
Real Wages Slump; Gradual Pickup in Nominal Base Wages Intact
The gradual pickup in nominal wages in Japan continued while the drop in real wages accelerated as the prices for daily necessities remain on the uptrend, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 11th straight year-on-year rise but the pace of increase decelerated to a preliminary 0.5 percent in November after rising 1.4 percent (revised down from 1.8 percent) in October and 2.2 percent in September. It was the weakest figure since December 2021, when total earnings fell 0.4 percent.
In real terms, average wages plunged a preliminary 3.8 percent on year for the eighth straight drop after falling 2.9 percent (revised down from a 2.6 percent drop) in October and 1.2 percent in September. It was the deepest drop since the 4.1 percent slump recorded in May 2014, when consumer inflation was temporarily boosted to above 3 percent after the sales tax was raised to 5 percent from 3 percent in the previous month.
To calculate real wages, the ministry uses the overall consumer price index minus owners' equivalent rent, which surged 4.5 percent on year in November after a similarly sharp 4.4 percent rise in October. It was well above the 3.8 percent rise in total CPI and the 3.7 percent gain in core CPI (excluding fresh food) for November.
Base wages rose 1.5 percent on year in November, marking the 13th straight gain after rising 1.0 percent (revised down from 1.3 percent) in October and 1.4 percent in September. The key indicator for overall wages has been on a modest recovery trend this year.
Market Consensus Before Announcement
Japan's real household spending is expected to be sluggish in November. It is forecast to have posted a sixth straight year-over-year rise but the pace of increase seems to have slowed to 0.5 percent from 1.2 percent in October. On the month, average spending by households with two or more people is forecast to have fallen 0.4 percent for the first drop in three months after rising 1.1 percent in October.
The government's new travel discount program and eased Covid border control, both of which took effect in early October, continued supporting the tourism industry and some retailers, while surging prices for food, utilities and durable goods are reducing the purchasing power of many households.
The government's new travel discount program and eased Covid border control, both of which took effect in early October, continued supporting the tourism industry and some retailers, while surging prices for food, utilities and durable goods are reducing the purchasing power of many households.
Definition
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.
Description
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.
