Japan's real household spending posted its first year-over-year rise in three months in July but with a sluggish undertone of rising just 0.1 percent, as dangerously hot and humid weather kept people indoors while demand for air conditioners and beverages skyrocketed.

The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, dipped 0.8 percent after rising 1.3 percent in June for the first increase in 16 months.

The overall spending rise came in much weaker than the median forecast of a 1.0 percent increase and followed a 1.4 percent decline in June, an unexpected 1.8 percent slump in May, and a 0.5 percent gain in April which was the first rise in 14 months.

The increase was led by high spending on a volatile factor of home maintenance and repairs including installations of induction cooktops (too hot to use gas stoves?), as well as on TVs (replacement demand amid Paris Summer Olympics), laptops and domestic package tours. It was largely offset by drops in transport equipment other than automobiles (motorcycles), car parts and gift money.

Compared to the previous month, real average expenditures by households with two or more people plunged a seasonally adjusted 1.7 percent, as the killer heat wave intensified, after edging up 0.1 percent and falling the previous two months. Record high temperatures in many regions propped up demand for air conditioners, refrigerators and beverages but it was dangerous to stay outdoors. It was much weaker than the median forecast of a 0.6 percent slip.

Econoday's Relative Performance Index stands at minus 23, below zero, which indicates the Japanese economy is performing worse than expected after underperforming with a narrower margin recently. Excluding the impact of inflation, the RPI is at minus 71.

The average real income of households with salaried workers rose 5.5 percent in July after rising 3.1 percent in June. In nominal terms, the average income grew 8.1 percent following a 6.5 percent gain the previous month. This indicates that a high pace of wage growth by Japanese standards is spreading to smaller firms that employ about 70 percent of the workforce.

Japan's real household spending is forecast to be nearly flat, up just 1.0 percent on year in July (there is a high downside risk), after falling 1.4 percent in June for a second straight drop, which was caused by volatile factors including home maintenance and car purchases. The killer heat wave is wreaking havoc across Japan, claiming many lives and sending others to hospitals. It also boosted consumer prices at a time when many households are being hit by higher utility bills as the government ended its 18-month-long subsidies.

On the month, real average expenditures by households with two or more people are expected to slump 0.6 percent after edging up 0.1 percent and falling the previous two months.Record high temperatures in many regions propped up demand for air conditioners, refrigerators and beverages but it was dangerous to stay outdoors.

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.