| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -0.3% | -2.8% to 0.7% | -0.9% | -1.0% |
| Year over Year | -2.1% | -4.3% to -1.4% | -2.5% | -2.9% |
Highlights
Japan's real household spending posted its 10th straight drop on the year in December, down a deeper-than-expected 2.5 percent, following a 2.9 percent dip in November. The consensus call was a 2.1 percent drop.
On the month, expenditures fell a worse-than-expected 0.9 percent for the third drop in a row (versus the median forecast of a 0.3 percent fall), after slumping by 1.0 percent in November, which was also weaker than forecast.
People continued eating out in the absence of strict Covid rules and spending on vehicles rebounded after a pullback in November but these factors were not strong enough to offset the impact of the widespread move among consumers to switch to discount mobile phone plans and the pandemic-era necessity to simplify weddings and funerals. The decrease was also due to lower spending on postage for New Year's cards in a growing shift toward sending seasonal greetings by social media, as seen in the November data.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, slumped 3.4 percent on the year in December, larger than the 2.5 percent drop in overall spending, after falling 0.9 percent in November (down 2.9 percent overall). November's overall drop was largely caused by lower spending on home maintenance and repairs as well as vehicles, all volatile items.
Core expenditures rebounded a modest 0.6 percent on quarter in the October-December quarter for the first rise in four quarters after decreases of 0.8 percent in July-September, 2.4 percent in April-June and 0.4 percent in January-March and a 0.7 percent gain in October-December 2022, indicating that private consumption is likely to provide only a limited positive contribution to total domestic output in the preliminary fourth quarter GDP data due on Feb. 15. Economists expect the fourth quarter GDP to post modest growth after marking the first contraction in four quarters in the previous three-month period.
The average real income of households with salaried workers posted the 15th straight year-over-year drop, down 7.2 percent in December (down 4.4 in nominal terms) after falling 4.7 percent in November (down a nominal 1.6 percent). The main bread-earner's real income in the average household marked the 12th straight year-over-year drop while the average spouse real income posted the eighth straight drop after recording the first decline in 16 months in May 2023.
Econoday's Relative Performance Index stood at minus 21, below zero, which indicates the Japanese economy is performing worse than expected after outperforming at the same rate recently. Excluding the impact of inflation, the RPI was at minus 10.
Both the government and the Bank of Japan have been providing stimulus to help the economy recover from the pandemic-caused slump and prevent it from slipping back into deflation. Real wages remain below year-earlier levels.
On the month, expenditures fell a worse-than-expected 0.9 percent for the third drop in a row (versus the median forecast of a 0.3 percent fall), after slumping by 1.0 percent in November, which was also weaker than forecast.
People continued eating out in the absence of strict Covid rules and spending on vehicles rebounded after a pullback in November but these factors were not strong enough to offset the impact of the widespread move among consumers to switch to discount mobile phone plans and the pandemic-era necessity to simplify weddings and funerals. The decrease was also due to lower spending on postage for New Year's cards in a growing shift toward sending seasonal greetings by social media, as seen in the November data.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, slumped 3.4 percent on the year in December, larger than the 2.5 percent drop in overall spending, after falling 0.9 percent in November (down 2.9 percent overall). November's overall drop was largely caused by lower spending on home maintenance and repairs as well as vehicles, all volatile items.
Core expenditures rebounded a modest 0.6 percent on quarter in the October-December quarter for the first rise in four quarters after decreases of 0.8 percent in July-September, 2.4 percent in April-June and 0.4 percent in January-March and a 0.7 percent gain in October-December 2022, indicating that private consumption is likely to provide only a limited positive contribution to total domestic output in the preliminary fourth quarter GDP data due on Feb. 15. Economists expect the fourth quarter GDP to post modest growth after marking the first contraction in four quarters in the previous three-month period.
The average real income of households with salaried workers posted the 15th straight year-over-year drop, down 7.2 percent in December (down 4.4 in nominal terms) after falling 4.7 percent in November (down a nominal 1.6 percent). The main bread-earner's real income in the average household marked the 12th straight year-over-year drop while the average spouse real income posted the eighth straight drop after recording the first decline in 16 months in May 2023.
Econoday's Relative Performance Index stood at minus 21, below zero, which indicates the Japanese economy is performing worse than expected after outperforming at the same rate recently. Excluding the impact of inflation, the RPI was at minus 10.
Both the government and the Bank of Japan have been providing stimulus to help the economy recover from the pandemic-caused slump and prevent it from slipping back into deflation. Real wages remain below year-earlier levels.
Market Consensus Before Announcement
Japan's real household spending is forecast to post its 10th straight drop on the year in December, down 2.1 percent, after falling a larger-than-expected 2.9 percent in November, as consumers remain frugal amid elevated costs for daily necessities. The November drop was largely caused by lower spending on home maintenance and repairs as well as vehicles. Excluding those volatile items, the core measure fell a much smaller 0.9 percent.
On the month, expenditures are forecast to dip 0.3 percent for a third drop in a row after a 1.0 percent slump in November. Retail sales turned weaker in December, rising just 2.1 percent on year after a 5.4 percent gain in November and plunging 2.9 percent on the month. Demand for winter clothing and heaters stabilized after a cold snap triggered a surge in the previous month, vehicle sales slowed and easing inflation put a damper on values of foodstuffs and fuels.
On the month, expenditures are forecast to dip 0.3 percent for a third drop in a row after a 1.0 percent slump in November. Retail sales turned weaker in December, rising just 2.1 percent on year after a 5.4 percent gain in November and plunging 2.9 percent on the month. Demand for winter clothing and heaters stabilized after a cold snap triggered a surge in the previous month, vehicle sales slowed and easing inflation put a damper on values of foodstuffs and fuels.
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.
