Japanese retail sales posted a slight 0.5% gain on the year in September after rising an upwardly revised 3.1% in August. It was much weaker than the consensus call of a 1.7% increase. On the month, retail sales plunged 2.3% for the first drop in six months after rising an upwardly revised 1.0% in the prior month. July-September sales slowed to a 1.1% increase on quarter after a 1.8% rise in April-June.

The three-month moving average of the seasonally adjusted index of retail sales fell 0.3% in September after many months of gains, prompting the Ministry of Economy, Trade and Industry to downgrade its assessment, saying retail sales are"taking one step forward and one step back." Previously, it had said sales were"on an uptrend."

The slight year-on-year increase in retail sales was led by a sharp rise in clothing as the protracted heat wave shored up demand for summer clothing but the hot and humid weather also hurt sales of autumn clothing and other seasonal goods, pushing down combined sales at department stores and supermarkets to record a slight drop. Auto sales posted their second straight drop on year and fuels marked their first fall in three months on lower prices.

Japanese retail sales are forecast to show a modest 1.7% gain on the year in September after rising an upwardly revised 3.1% in August. New vehicle sales appear to have gained some traction, but department store sales lost more steam and gasoline prices fell further. On the month, retail sales are expected to dip 1.3% for their first drop in six months after rising an upwardly revised 1.0% in the prior month.

Last month, the Ministry of Economy, Trade and Industry maintained its assessment after upgrading it for the second straight month for the June data, saying retail sales are"on an uptrend."

Industry data released last week showed department store sales marked the 31st straight year-over-year rise in September, up 2.3%, with the pace of increase decelerating further from 3.9% in August, 5.5 % in July and 14.0% in June. Sales last month slumped 14.8% from the pre-pandemic September 2019, a second straight drop in five-year comparison after a 0.3% dip in August that ensued many months of gains that confirmed that the economy had recovered from the Covid slump.

The increase was led by continued strong demand for luxury brands and spending by visitors from overseas amid the weak yen but the Japan Department Stores Association also noted that the lingering heat wave dampened demand for autumnal seasonal goods while supporting sales of summer clothing and UV skin care products.

Retail Sales measure the total receipts at stores that sell durable and nondurable goods. The data are part of the Preliminary Report on the Current Survey of Commerce.

Another way to look at consumer spending in addition to the household spending survey is through the retail sales report. This report gives the total value of goods and services sold each month at retail outlets. The preferred number is the change from the previous year. The report serves as a direct gauge of consumption and consumer confidence. Consumer spending is one of the most important leading indicators for the Japanese economy. Increasing sales signal consumer confidence and economic growth, but higher consumption also leads to inflationary pressures.