| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | 0.6% | -0.7% to 2.5% | 3.9% | -2.7% |
| Year over Year | -4.5% | -5.8% to -2.7% | -2.5% | -5.0% |
Highlights
Japan's real household spending posted its sixth straight drop on the year in August as high costs have prompted more selective consumption patterns, with many switching to discount mobile phone plans, holding simpler ceremonies and cutting after-school tutoring, data released Friday by the Ministry of Internal Affairs and Communications showed.
But the decline came in smaller than expected as the first summer holiday season in four years without Covid public health restrictions helped further boost pent-up demand for traveling and eating out. On the month, high demand for summer clothing and other seasonal goods amid the lingering heat wave seems to have triggered a stronger-than-expected rebound in expenditures but it is also in reaction to an unexpected slump in July.
Real average spending by households with two or more people fell 2.5 percent on the year in August after falling 5.0 percent in July, 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 stronger than the median economist forecast of a 4.5 percent fall (forecasts ranged from 5.8 percent to 2.7 percent drops). The decrease was the ninth in 12 months.
Compared to the previous month, real average household spending jumped a seasonally adjusted 3.9 percent in August after unexpectedly plunging 2.7 percent in July, rebounding a modest 0.9 percent in June and following four months of decline. The increase was the fifth in 12 months. The latest figure was much stronger than the consensus forecast of a 0.6 percent rise (forecasts ranged from a 0.7 drop to a 2.5 percent gain).
Econoday's Relative Performance Index stood at plus 26, above zero, which indicates the Japanese economy is performing better than expected after underperforming with a small margin recently. Excluding the impact of inflation, the index was at plus 36.
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 slightly positive after three years of staying in negative territory but real wages remain weak.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, fell 3.2 percent on the year in August, compared to the 2.5 percent drop in overall spending, after falling 3.1 percent in July (down 5.0 percent overall).
Households have reduced spending on weddings, funerals and other ceremonies as they have simplified the procedures to avoid close contact during the pandemic. The decline in overall spending is also due to the widespread move to switch to discount mobile phone plans and cancel land line telephone contracts. Households have also trimmed spending on after-school education support for high school students and young children as elevated costs for daily necessities have eroded their purchasing power.
Spending on healthcare services and equipment (face masks and fever thermometers) marked the fourth straight year-over-year drop as the government widely eased Covid restrictions in May and many people had already received dental treatment in April ahead of the official announcement on downgrading the threat of the pandemic.
Many households continued spending less on groceries and prepared food, compared to the earlier phase of the pandemic, when they had cooked more at home and bought takeout food to avoid close contact. They are also being frugal as food costs remain high.
On the upside, households continued spending more on eating out, train fees and airfares as well as overseas and domestic package tours amid eased Covid restrictions.
The real spending adjusted index (2020 = 100) stood at a five-month high of 99.8 in August, up sharply from 96.1 in July, 98.9 in June and 97.9 in May. The index had 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 July figure was the lowest under the current statistical formula dating to January 2020.
The average real income of households with salaried workers posted the 11th straight year-over-year drop, down 6.9 percent in August (down 3.5 percent in nominal terms) after falling 6.6 percent (down a nominal 3.0 percent) in July. The main bread-earner's real income in the average household marked the eighth straight year-over-year drop while the average spouse real income posted the fourth straight drop after recording the first decline in 16 months in May.
Real Wage Drop Continues; Nominal Base Wages Post Solid Gain
In another development, the pickup in nominal wages in Japan continued for nearly two years while real wages fell on the year for the 17th straight month, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 20th straight year-on-year rise, up a preliminary 1.1 percent in August, after rising 1.1 percent (revised down from 1.3 percent) in July, 2.3 percent in June, 2.9 percent in May and a modest 0.8 percent in April. The recent slower pace was due to a decline in bonuses and other special pay in August and no growth in overtime pay in July.
Base wages rose a solid 1.6 percent on year, marking the 22nd straight gain, after rising 1.4 percent in July. The pace of increase has accelerated in recent months as many firms are raising wages to secure workers. The key indicator for overall wages has been on a recovery trend.
In real terms, average wages fell a preliminary 2.5 percent on year in August for the 17th consecutive drop after slumping 2.7 percent (revised down from 2.5 percent) in July, 1.6 percent in June, 0.9 percent in May and 3.2 percent in April. To calculate real wages, the ministry uses the overall consumer price index minus the structurally weak owners' equivalent rent, which rose 3.7 percent on year in August after rising 3.9 percent in July.
But the decline came in smaller than expected as the first summer holiday season in four years without Covid public health restrictions helped further boost pent-up demand for traveling and eating out. On the month, high demand for summer clothing and other seasonal goods amid the lingering heat wave seems to have triggered a stronger-than-expected rebound in expenditures but it is also in reaction to an unexpected slump in July.
Real average spending by households with two or more people fell 2.5 percent on the year in August after falling 5.0 percent in July, 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 stronger than the median economist forecast of a 4.5 percent fall (forecasts ranged from 5.8 percent to 2.7 percent drops). The decrease was the ninth in 12 months.
Compared to the previous month, real average household spending jumped a seasonally adjusted 3.9 percent in August after unexpectedly plunging 2.7 percent in July, rebounding a modest 0.9 percent in June and following four months of decline. The increase was the fifth in 12 months. The latest figure was much stronger than the consensus forecast of a 0.6 percent rise (forecasts ranged from a 0.7 drop to a 2.5 percent gain).
Econoday's Relative Performance Index stood at plus 26, above zero, which indicates the Japanese economy is performing better than expected after underperforming with a small margin recently. Excluding the impact of inflation, the index was at plus 36.
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 slightly positive after three years of staying in negative territory but real wages remain weak.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, fell 3.2 percent on the year in August, compared to the 2.5 percent drop in overall spending, after falling 3.1 percent in July (down 5.0 percent overall).
Households have reduced spending on weddings, funerals and other ceremonies as they have simplified the procedures to avoid close contact during the pandemic. The decline in overall spending is also due to the widespread move to switch to discount mobile phone plans and cancel land line telephone contracts. Households have also trimmed spending on after-school education support for high school students and young children as elevated costs for daily necessities have eroded their purchasing power.
Spending on healthcare services and equipment (face masks and fever thermometers) marked the fourth straight year-over-year drop as the government widely eased Covid restrictions in May and many people had already received dental treatment in April ahead of the official announcement on downgrading the threat of the pandemic.
Many households continued spending less on groceries and prepared food, compared to the earlier phase of the pandemic, when they had cooked more at home and bought takeout food to avoid close contact. They are also being frugal as food costs remain high.
On the upside, households continued spending more on eating out, train fees and airfares as well as overseas and domestic package tours amid eased Covid restrictions.
The real spending adjusted index (2020 = 100) stood at a five-month high of 99.8 in August, up sharply from 96.1 in July, 98.9 in June and 97.9 in May. The index had 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 July figure was the lowest under the current statistical formula dating to January 2020.
The average real income of households with salaried workers posted the 11th straight year-over-year drop, down 6.9 percent in August (down 3.5 percent in nominal terms) after falling 6.6 percent (down a nominal 3.0 percent) in July. The main bread-earner's real income in the average household marked the eighth straight year-over-year drop while the average spouse real income posted the fourth straight drop after recording the first decline in 16 months in May.
Real Wage Drop Continues; Nominal Base Wages Post Solid Gain
In another development, the pickup in nominal wages in Japan continued for nearly two years while real wages fell on the year for the 17th straight month, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 20th straight year-on-year rise, up a preliminary 1.1 percent in August, after rising 1.1 percent (revised down from 1.3 percent) in July, 2.3 percent in June, 2.9 percent in May and a modest 0.8 percent in April. The recent slower pace was due to a decline in bonuses and other special pay in August and no growth in overtime pay in July.
Base wages rose a solid 1.6 percent on year, marking the 22nd straight gain, after rising 1.4 percent in July. The pace of increase has accelerated in recent months as many firms are raising wages to secure workers. The key indicator for overall wages has been on a recovery trend.
In real terms, average wages fell a preliminary 2.5 percent on year in August for the 17th consecutive drop after slumping 2.7 percent (revised down from 2.5 percent) in July, 1.6 percent in June, 0.9 percent in May and 3.2 percent in April. To calculate real wages, the ministry uses the overall consumer price index minus the structurally weak owners' equivalent rent, which rose 3.7 percent on year in August after rising 3.9 percent in July.
Market Consensus Before Announcement
Japan's real household spending is forecast to post its sixth straight drop on the year in August, down 4.5 percent, after falling 5.0 percent in July as elevated costs for daily necessities have eroded consumer purchasing power. The first summer holiday season in four years without Covid public health restrictions supported traveling and eating out but the lingering heat wave prompted some people to stay home. Expenditures are expected to rebound slightly by 0.6 percent on strong demand for summer clothing and other seasonal goods after unexpectedly slumping 2.7 percent in July and rising 0.9 percent in June.
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.
