| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -1.4% | -2.1% to 0.3% | 2.3% | 0.4% |
| Year over Year | -0.3% | -1.0% to 1.5% | 2.7% | -0.4% |
Highlights
Japan's real household spending unexpectedly surged in December, rising 2.7% on year and following a 0.4% dip to mark the first increase in five months and only the third in 12, as deal-hungry, inflation-weary consumers rushed to donate to prefectures that offer generous free goods and services in return by the Dec. 31 tax year deadline. It is still uncertain whether the recent uptrend is sustainable.
The jump to Y352,633 in spending was the highest amount in 21 years (since Y355,228 in December 2003) and much stronger than the consensus call of a 0.3% slip, but it was also due to other volatile factors of vehicle purchases and home maintenance. Overall, households are cautious, trimming spending on vegetables (tomatoes, cabbage) and gift money (mostly sent to children studying away from home) as the costs for both fresh and processed food had been boosted by bad weather, high import costs amid the weak yen and prolonged domestic rice supply shortages.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, rose at a slower 1.4% on the year after slumping 1.9% the previous month, when the overall spending slipped 0.4%.
On the month, real average expenditures by households with two or more people soared 2.3% (vs. consensus -1.4%) after edging up 0.4% in November, surging 2.9% in October and slumping 1.3% in September.
In the October-December quarter, real core household spending rose just 0.5% on year after falling 1.0% for the first increase in nine quarters but still indicates private consumption in the Q4 GDP data due on Feb. 17 will remain sluggish.
The average real income of households with salaried workers jumped 2.9% in December on year for the third straight gain, thanks to higher year-end bonuses built into wages. It followed a 0.7% rise in November and a 1.1% rebound in October from September's 1.6% dip, which was the first decrease in five months. The average real income of the primary bread earners was up 2.8% for the third straight gain after rising 1.3% the previous month while their spouses' average income marked the 11th increase in a row, up just 0.2%, following a 4.3% gain.
In nominal terms, the average household income grew 7.2% following increases of 4.1% in November, 3.7% in October, 1.3% in September and 5.6% in August.
In another set of data, total monthly average cash earnings per regular employee in Japan posted their 36th straight year-on-year rise, up a nominal 4.8% in December, after rising 3.9% (revised up sharply from 3.0%) in November. Base wages rose 2.7% on year, up from a downwardly revised 2.5% gain (initially +2.7%) the previous month. Real average wages rose 0.6% after marking their first y/y rise in five months in November, up 0.5% (revised up from a 0.3% drop). To calculate real wages, the labor ministry uses the overall consumer price index minus the historically subdued owners' equivalent rent, which jumped 4.2% on year.
The jump to Y352,633 in spending was the highest amount in 21 years (since Y355,228 in December 2003) and much stronger than the consensus call of a 0.3% slip, but it was also due to other volatile factors of vehicle purchases and home maintenance. Overall, households are cautious, trimming spending on vegetables (tomatoes, cabbage) and gift money (mostly sent to children studying away from home) as the costs for both fresh and processed food had been boosted by bad weather, high import costs amid the weak yen and prolonged domestic rice supply shortages.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, rose at a slower 1.4% on the year after slumping 1.9% the previous month, when the overall spending slipped 0.4%.
On the month, real average expenditures by households with two or more people soared 2.3% (vs. consensus -1.4%) after edging up 0.4% in November, surging 2.9% in October and slumping 1.3% in September.
In the October-December quarter, real core household spending rose just 0.5% on year after falling 1.0% for the first increase in nine quarters but still indicates private consumption in the Q4 GDP data due on Feb. 17 will remain sluggish.
The average real income of households with salaried workers jumped 2.9% in December on year for the third straight gain, thanks to higher year-end bonuses built into wages. It followed a 0.7% rise in November and a 1.1% rebound in October from September's 1.6% dip, which was the first decrease in five months. The average real income of the primary bread earners was up 2.8% for the third straight gain after rising 1.3% the previous month while their spouses' average income marked the 11th increase in a row, up just 0.2%, following a 4.3% gain.
In nominal terms, the average household income grew 7.2% following increases of 4.1% in November, 3.7% in October, 1.3% in September and 5.6% in August.
In another set of data, total monthly average cash earnings per regular employee in Japan posted their 36th straight year-on-year rise, up a nominal 4.8% in December, after rising 3.9% (revised up sharply from 3.0%) in November. Base wages rose 2.7% on year, up from a downwardly revised 2.5% gain (initially +2.7%) the previous month. Real average wages rose 0.6% after marking their first y/y rise in five months in November, up 0.5% (revised up from a 0.3% drop). To calculate real wages, the labor ministry uses the overall consumer price index minus the historically subdued owners' equivalent rent, which jumped 4.2% on year.
Market Consensus Before Announcement
Japan's real household spending is forecast to post a fifth straight drop in December, down 0.3% on year, as flat growth in real wages amid elevated costs for food and other necessities continued squeezing consumers, following a 0.4% dip in November. Lower temperatures supported demand for winter clothing. Forecasts range widely from a 1.0% drop to a 1.5% gain.
On the month, real average expenditures by households with two or more people are expected to fall 1.4% after edging up 0.4% in November, surging 2.9% in October and slumping 1.3% in September.
On the month, real average expenditures by households with two or more people are expected to fall 1.4% after edging up 0.4% in November, surging 2.9% in October and slumping 1.3% in September.
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.
