Japanese retail sales posted their 12th straight year-over-year increase in February, with the pace of increase at 6.6 percent above forecast and accelerating from January's 5.0 percent gain, led by continued recovery in department store sales, a pickup in new vehicle sales, rising costs for food and beverages, data released Friday by the Ministry of Economy, Trade and Industry showed.

It was partly due to the 0.9 percent drop seen in February 2022.

Retail sales showed some resiliency, recording a 1.4 percent gain on the month in February, coming in stronger than the consensus call of a 0.9 percent drop.

Consumer spending on goods has been solid while expenditures on services have been supported by the government's domestic travel discount program, which was launched in October and resumed in January on a smaller scale after a brief suspension during the yearend and New Year holidays.

Domestic demand is likely to be supported by consumer spending on goods and services as the economy continues to reopen, but the purchasing power of many households has been reduced by rising costs for daily necessities and falling real wages.

The monthly Economy Watchers Survey, which was conducted by the Cabinet Office from Feb. 25 to Feb. 28 and released March 8, indicated that confidence picked up sharply in February as the economy continued reopening and anti-Covid public health rules were scheduled to be eased further in March. The outlook was mixed, however, as some firms found it hard to fully pass higher producer costs onto customers.

The Econoday Consensus Divergence Index stood at plus 29, above zero, which indicates the Japanese economy is performing better than expected after outperforming earlier. Excluding the impact of inflation, the index was at plus 35.

Despite some rosy data, Japanese policymakers believe the economy needs continued monetary and fiscal policy support to achieve sustainable wage growth and stable 2 percent inflation, pointing that the output gap remains in negative territory.

The ministry upgraded its assessment for the second straight month, saying retail sales are"on an uptrend," instead of"on a gradual uptrend." Previously, it had said retail sales were"picking up." It noted that the three-month moving average in seasonally adjusted retail sales rose 0.8% in February for the eighth straight gain after rising 0.3% in the previous two months.

Japanese retail sales are forecast to show their 12th straight year-over-year increase in February, up 6.1 percent, with the pace of increase accelerating from a downwardly revised 5.0 percent rise in January, led by continued gains in department store sales and a pickup in new vehicle sales as well as rising costs for food and beverages.

Retail Sales measure the total receipts at stores that sell durable and nondurable goods. The data are part of the Preliminary Report on the Current Survey of Commerce.

Another way to look at consumer spending in addition to the household spending survey is through the retail sales report. This report gives the total value of goods and services sold each month at retail outlets. The preferred number is the change from the previous year. The report serves as a direct gauge of consumption and consumer confidence. Consumer spending is one of the most important leading indicators for the Japanese economy. Increasing sales signal consumer confidence and economic growth, but higher consumption also leads to inflationary pressures.