| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | 0.2% | -0.6% to 3.1% | 0.9% | -1.1% |
| Year over Year | -4.5% | -5.5% to -1.9% | -4.2% | -4.0% |
Highlights
Japan's real household spending posted its fourth straight decline on the year in June as mobile phone users continued seeking discount plans and consumers were generally frugal amid high costs for daily necessities, but spending on the month did mark a modest gain after four months of decline, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Many households remain selective, spending more on traveling and eating out. Some also spent more on motor vehicles, a volatile item, as eased semiconductor shortages and improved supply chains had led to faster deliveries.
Spending slumped in the April-June quarter from January-March, indicating private consumption was weak in the preliminary GDP data for the second quarter due on Aug. 15.
The Econoday Consensus Divergence Index stood at plus 11, above zero, which indicates the Japanese economy is performing slightly better than expected after underperforming earlier. Excluding the impact of inflation, the index was at plus 15.
Both the government and the Bank of Japan have been providing stimulus to help the economy recover fully from the pandemic-caused slump. The negative output gap has narrowed recently but real wages remain depressed. Nominal wages are expected to grow at a fast pace in the current fiscal year amid labor shortages and high corporate earnings.
Real average spending by households with two or more people fell 4.2 percent on the year in June after falling 4.0 percent in May, 4.4 percent in April, 1.9 percent in March and rebounding 1.6 percent in February on a 0.3 percent dip in January. It was slightly firmer than the median economist forecast of a 4.5 percent fall (forecasts ranged from 5.5 percent to 1.9 percent drops). The decrease was the seventh in 12 months.
The decline was led by lower spending on durable goods including air conditioners and washers as many households had already bought those appliances a year earlier when they stayed more at home to avoid Covid infections. It was also due to the widespread move among mobile phone users to switch to discount plans.
On the upside, households spent more on autos and auto parts, thanks to improving supply chains, and overseas and domestic package tours amid eased Covid restrictions.
In a technical development, spending on electricity fell a nominal 7.2 percent on the year as utility prices were lowered by subsidies and a cut in the renewal energy promotion surcharge on electricity bills, but it rose 5.9 percent in real terms as the cost for electricity fell a sharp 12.4 percent on the year in the June CPI data, pushing up the purchasing power for this item.
Households continued spending less on groceries and prepared food, compared to the earlier phase of the pandemic, when households had cooked more at home and bought takeout food to avoid close contact.
On the month, real average household spending rose a seasonally adjusted 0.9 percent in June after decreases of 1.1 percent in May, 1.3 percent in April, 0.8 percent in March, 2.4 percent in February and a 2.7 percent rise in January. The increase was the fourth in 12 months. The latest figure was stronger than the consensus forecast of a 0.2 percent rise (forecasts ranged from a 0.6 drop to a 3.1 percent gain).
The real spending adjusted index (2020 = 100) stood at 98.9 in June, up from 97.9 in May (the lowest since 96.2 in August 2021), but down from 99.0 in April, 100.3 in March, 101.1 in February and 103.6 in January (the highest since 104.9 in April 2021).
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, shrank 2.4 percent on quarter in April-June for the second straight drop after slipping 0.4 percent in January-March and rising 0.7 percent in October-December, indicating that private consumption might have provided a negative contribution to second quarter growth in the preliminary GDP data.
Japan's economy is forecast by economists to post a solid 0.9 percent increase on quarter, or an annualized 3.3 percent rise, in April-June, led by net exports as a result of a sharp drop in imports, while consumer spending and business investment appear to have taken a breather. It would follow 0.7 percent growth on quarter, or an annualized 2.7 percent increase, in the first quarter of 2023, when an unexpected surge in private-sector inventories topped resilient consumer spending as the largest factor to lead the growth.
The average real income of households with salaried workers posted the ninth straight year-over-year drop, down 5.6 percent in June (down 1.9 percent in nominal terms) after falling 4.0 percent (down a nominal 0.4 percent) in May and slipping 1.4 percent (up a nominal 2.6 percent) in April. The main bread-earner's real income in the average household marked the sixth straight year-over-year drop while the average spouse real income posted the second straight drop after recording the first decline in 16 months in May.
Many households remain selective, spending more on traveling and eating out. Some also spent more on motor vehicles, a volatile item, as eased semiconductor shortages and improved supply chains had led to faster deliveries.
Spending slumped in the April-June quarter from January-March, indicating private consumption was weak in the preliminary GDP data for the second quarter due on Aug. 15.
The Econoday Consensus Divergence Index stood at plus 11, above zero, which indicates the Japanese economy is performing slightly better than expected after underperforming earlier. Excluding the impact of inflation, the index was at plus 15.
Both the government and the Bank of Japan have been providing stimulus to help the economy recover fully from the pandemic-caused slump. The negative output gap has narrowed recently but real wages remain depressed. Nominal wages are expected to grow at a fast pace in the current fiscal year amid labor shortages and high corporate earnings.
Real average spending by households with two or more people fell 4.2 percent on the year in June after falling 4.0 percent in May, 4.4 percent in April, 1.9 percent in March and rebounding 1.6 percent in February on a 0.3 percent dip in January. It was slightly firmer than the median economist forecast of a 4.5 percent fall (forecasts ranged from 5.5 percent to 1.9 percent drops). The decrease was the seventh in 12 months.
The decline was led by lower spending on durable goods including air conditioners and washers as many households had already bought those appliances a year earlier when they stayed more at home to avoid Covid infections. It was also due to the widespread move among mobile phone users to switch to discount plans.
On the upside, households spent more on autos and auto parts, thanks to improving supply chains, and overseas and domestic package tours amid eased Covid restrictions.
In a technical development, spending on electricity fell a nominal 7.2 percent on the year as utility prices were lowered by subsidies and a cut in the renewal energy promotion surcharge on electricity bills, but it rose 5.9 percent in real terms as the cost for electricity fell a sharp 12.4 percent on the year in the June CPI data, pushing up the purchasing power for this item.
Households continued spending less on groceries and prepared food, compared to the earlier phase of the pandemic, when households had cooked more at home and bought takeout food to avoid close contact.
On the month, real average household spending rose a seasonally adjusted 0.9 percent in June after decreases of 1.1 percent in May, 1.3 percent in April, 0.8 percent in March, 2.4 percent in February and a 2.7 percent rise in January. The increase was the fourth in 12 months. The latest figure was stronger than the consensus forecast of a 0.2 percent rise (forecasts ranged from a 0.6 drop to a 3.1 percent gain).
The real spending adjusted index (2020 = 100) stood at 98.9 in June, up from 97.9 in May (the lowest since 96.2 in August 2021), but down from 99.0 in April, 100.3 in March, 101.1 in February and 103.6 in January (the highest since 104.9 in April 2021).
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, shrank 2.4 percent on quarter in April-June for the second straight drop after slipping 0.4 percent in January-March and rising 0.7 percent in October-December, indicating that private consumption might have provided a negative contribution to second quarter growth in the preliminary GDP data.
Japan's economy is forecast by economists to post a solid 0.9 percent increase on quarter, or an annualized 3.3 percent rise, in April-June, led by net exports as a result of a sharp drop in imports, while consumer spending and business investment appear to have taken a breather. It would follow 0.7 percent growth on quarter, or an annualized 2.7 percent increase, in the first quarter of 2023, when an unexpected surge in private-sector inventories topped resilient consumer spending as the largest factor to lead the growth.
The average real income of households with salaried workers posted the ninth straight year-over-year drop, down 5.6 percent in June (down 1.9 percent in nominal terms) after falling 4.0 percent (down a nominal 0.4 percent) in May and slipping 1.4 percent (up a nominal 2.6 percent) in April. The main bread-earner's real income in the average household marked the sixth straight year-over-year drop while the average spouse real income posted the second straight drop after recording the first decline in 16 months in May.
Market Consensus Before Announcement
Japan's real household spending is forecast to have posted its fourth straight decline on the year in June, down 4.5 percent versus May's 4.0 percent dip, as mobile phone users are seeking discount plans and consumers are generally frugal amid high costs for daily necessities while pent-up demand for traveling and eating out remains solid.
Expenditures appear to be nearly flat on the month in June, up 0.2 percent, after falling 1.1 percent in May and 1.3 percent in April, which would confirm the median forecast that private consumption in the April-June period will be nearly flat, up just 0.1 percent on quarter, providing little contribution to second quarter GDP growth.
Expenditures appear to be nearly flat on the month in June, up 0.2 percent, after falling 1.1 percent in May and 1.3 percent in April, which would confirm the median forecast that private consumption in the April-June period will be nearly flat, up just 0.1 percent on quarter, providing little contribution to second quarter GDP growth.
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.
