Japan's real household spending posted a modest rebound on the year for the first rise in four months in February as the economy continues to reopen without strict public health rules, but the increase was partly offset by the widespread move to switch to discount mobile phone plans, data released Friday by the Ministry of Internal Affairs and Communications showed.

Households slashed spending on the month, giving up most of a hefty gain made in January, as many consumers have been hit by continued markups in daily necessities and falling real wages.

The Econoday Consensus Divergence Index stood at minus 4, just below zero, which indicates the Japanese economy is performing slightly worse than expected. Excluding the impact of inflation, the index was at minus 11.

Both the government and the Bank of Japan have been providing stimulus to help the economy recover fully from the pandemic-caused slump. The output gap has remained negative while wage growth has been slow.

Real average spending by households with two or more people rebounded 1.6 percent on the year in February for the first rise in four months after falling 0.3 percent in January and coming in much weaker the median economist forecast of a 4.8 percent rise (forecasts ranged from 1.3 percent to 5.4 percent gains). It was the sixth increase in 12 months. November's 1.2 percent drop was the first in six months following a 1.2 percent rise in October.

The increase in February was led by higher electricity bills, which reflected the need to use more heating during the freezing weather in late January. Some electricity meter readings were conducted in January before the government's expanded energy subsidies took effect.

As seen in recent months, households also spent more on eating out, hotels and domestic travel packages, compared to a year earlier, when the government urged restaurants and bars to cut business hours and people to stay home during the Omicron storm. In 2022, the government resumed restrictions on social and economic activities in 35 of the 47 prefectures in late January and extended strict Covid rules for Tokyo and 17 other jurisdictions until March 21.

The year-over-year increase was partly offset by the move among many mobile phone users to switch to discount plans. There is also a shift toward shopping at physical stores from ordering goods online, which resulted in lower spending on home delivery costs in February, the official said. Households continued spending less on groceries (fish) and prepared food (bento boxes), compared to the earlier phase of the pandemic, when households had cooked more at home and bought takeout food to avoid contact.

On the month, real average household spending slumped a seasonally adjusted 2.4 percent in February after jumping 2.7 percent in January, falling 1.4 percent in December and 0.4 percent in November and rising 0.7 percent in October. It was the sixth decrease in 12 months and sharper than the consensus forecast of a 0.5 percent slip (economist forecasts ranged from a 2.1 percent dip to a 1.3 percent rise). The real spending adjusted index stood at 101.1 after rising to 103.6 in January for the highest point since 104.9 in April 2021 and dipping to 100.9 in December.

The average real income of households with salaried workers posted the fifth straight year-over-year drop, down 0.8 percent in February (up 3.1 percent in nominal terms), after falling 1.7 percent (up a nominal 3.3 percent) in January. The main bread-earner's real income in the average household marked the second straight year-over-year drop while the average spouse real income posted the 13th straight rise.

The gradual pickup in nominal wages in Japan continued while real wages recorded the 11th straight year-on-year drop, data released Friday by the Ministry of Health, Labour and Welfare showed.

Total monthly average cash earnings per regular employee in Japan posted their 14th straight year-over-year rise, up a preliminary 1.1 percent in February, after rising 0.8 percent and surging 4.1 percent in December, which was led by winter bonus payments that were concentrated at the end of the year.

In real terms, average wages fell a preliminary 2.6 percent on year after slumping 4.1 percent in January and edging down 0.6 percent in December. To calculate real wages, the ministry uses the overall consumer price index minus owners' equivalent rent, which rose 3.9 percent on year in February after surging 5.1 percent in January. It was above the 3.1 percent annual rate in the core CPI (excluding fresh food) for the month.

Base wages rose 1.1 percent on year, marking the 16th straight gain after rising a revised 0.9 percent in January and 1.4 percent in December. The key indicator for overall wages has been on a modest recovery trend this year.

Japan's real household spending is forecast to post a solid 4.8 percent rebound on the year in February, for the first rise in four months after a 0.3 percent dip in January, as the economy continues to reopen without strict public health rules, overcoming much of the drag from the pandemic. But households appear to have trimmed spending by a slight 0.5 percent on the month, hit by continued markups in food and falling real wages.

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.