| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | 0.7% | -0.6% to 1.1% | -2.7% | 0.9% |
| Year over Year | -2.5% | -3.5% to -2.3% | -5.0% | -4.2% |
Highlights
Japan's real household spending posted its fifth straight drop on the year in July as high costs for food and other daily necessities have made consumers more frugal while spending more on dining out and traveling in the absence of strict Covid public health rules, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Some households had already purchased electric appliances and furniture in an earlier phase of the pandemic, exerting downward pressures on goods spending. People have also trimmed spending on face masks and fever thermometers after the government lifted many Covid restrictions in May.
Expenditures unexpectedly slumped on the month in July after a modest rebound in June. The heat wave has been a double-edged sword, supporting sales at airconditioned retail stores while having a dampening effect on outdoor leisure facilities.
The Econoday Consensus Divergence Index stood at minus 39, well below zero, which indicates the Japanese economy is performing much worse than expected after underperforming with a smaller margin earlier. Excluding the impact of inflation, the index was at minus 50.
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 turned positive after three years of staying in negative territory but real wages remain weak. Nominal wages are expected to grow at a fast pace in the current fiscal year amid labor shortages.
Real average spending by households with two or more people slumped 5.0 percent on the year in July after slipping 4.2 percent in June, 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 much weaker than the median economist forecast of a 2.5 percent fall (forecasts ranged from 3.5 percent to 2.3 percent drops). The decrease was the eighth in 12 months.
The decline was led by lower spending on home repairs and maintenance compared to a year earlier, when people sent more time at home under tighter public health rules, as well as a pullback in automobiles purchases after a recent pickup on improved supply chains. Those categories tend to fluctuate widely from month to month. Households also spent less on funerals and other rituals as they have simplified the procedures to avoid close contact during the pandemic.
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 upside, households continued spending more on eating out, train and airfares, domestic package tours and hotels amid eased Covid restrictions.
Compared to the previous month, real average household spending plunged a seasonally adjusted 2.7 percent in July after rebounding a modest 0.9 percent in June and following four months of decline. The decrease was the eighth in 12 months. The latest figure was much weaker than the consensus forecast of a 0.7 percent rise (forecasts ranged from a 0.6 drop to a 1.1 percent gain).
The real spending adjusted index (2020 = 100) stood at 96.1 in July, down sharply from 98.9 in June and 97.9 in May. It is the lowest under the current statistical formula dating to January 2020 and just below 96.2 seen in August 2021. The index has drifted 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 average real income of households with salaried workers posted the 10th straight year-over-year drop, down 6.6 percent in July (down 3.0 percent in nominal terms) after falling 5.6 percent (down a nominal 1.9 percent) in June. The main bread-earner's real income in the average household marked the seventh straight year-over-year drop while the average spouse real income posted the third straight drop after recording the first decline in 16 months in May.
Some households had already purchased electric appliances and furniture in an earlier phase of the pandemic, exerting downward pressures on goods spending. People have also trimmed spending on face masks and fever thermometers after the government lifted many Covid restrictions in May.
Expenditures unexpectedly slumped on the month in July after a modest rebound in June. The heat wave has been a double-edged sword, supporting sales at airconditioned retail stores while having a dampening effect on outdoor leisure facilities.
The Econoday Consensus Divergence Index stood at minus 39, well below zero, which indicates the Japanese economy is performing much worse than expected after underperforming with a smaller margin earlier. Excluding the impact of inflation, the index was at minus 50.
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 turned positive after three years of staying in negative territory but real wages remain weak. Nominal wages are expected to grow at a fast pace in the current fiscal year amid labor shortages.
Real average spending by households with two or more people slumped 5.0 percent on the year in July after slipping 4.2 percent in June, 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 much weaker than the median economist forecast of a 2.5 percent fall (forecasts ranged from 3.5 percent to 2.3 percent drops). The decrease was the eighth in 12 months.
The decline was led by lower spending on home repairs and maintenance compared to a year earlier, when people sent more time at home under tighter public health rules, as well as a pullback in automobiles purchases after a recent pickup on improved supply chains. Those categories tend to fluctuate widely from month to month. Households also spent less on funerals and other rituals as they have simplified the procedures to avoid close contact during the pandemic.
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 upside, households continued spending more on eating out, train and airfares, domestic package tours and hotels amid eased Covid restrictions.
Compared to the previous month, real average household spending plunged a seasonally adjusted 2.7 percent in July after rebounding a modest 0.9 percent in June and following four months of decline. The decrease was the eighth in 12 months. The latest figure was much weaker than the consensus forecast of a 0.7 percent rise (forecasts ranged from a 0.6 drop to a 1.1 percent gain).
The real spending adjusted index (2020 = 100) stood at 96.1 in July, down sharply from 98.9 in June and 97.9 in May. It is the lowest under the current statistical formula dating to January 2020 and just below 96.2 seen in August 2021. The index has drifted 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 average real income of households with salaried workers posted the 10th straight year-over-year drop, down 6.6 percent in July (down 3.0 percent in nominal terms) after falling 5.6 percent (down a nominal 1.9 percent) in June. The main bread-earner's real income in the average household marked the seventh straight year-over-year drop while the average spouse real income posted the third straight drop after recording the first decline in 16 months in May.
Market Consensus Before Announcement
Japan's real household spending is forecast to post its fifth straight drop on the year in July as high costs for daily necessities continued to bite, but the pace of decrease is seen slowing to 2.5 percent from 4.2 percent in June on resilient spending on traveling and eating out. Some households had already purchased electric appliances and furniture in an earlier phase of the pandemic.
Expenditures are expected to mark a second straight rise on the month, up 0.7 percent, after a 0.9 percent gain in June. The prolonged heat wave supported demand for summer clothing and other seasonal goods.
Expenditures are expected to mark a second straight rise on the month, up 0.7 percent, after a 0.9 percent gain in June. The prolonged heat wave supported demand for summer clothing and other seasonal goods.
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.
