Japanese retail sales slowed to a sluggish 1.4% rise on year in February (consensus +1.5%), down from +4.4% (revised up from +3.9%) in January, as the severe winter weather chilled demand for spring clothing, prompting department store sales to post their first y/y dip in four months. The setback is also due to the calendar factor of a shorter shopping day compared to February 2023, when the leap-year effect led to a 4.7% jump in sales. Overall, elevated costs for food, energy and other necessities are keeping consumption sluggish.

The three-year winning streak in sales values was underpinned by a continued rebound in auto sales, lingering demand for winter clothing and heaters amid record snowfall in many regions as well as higher retail gasoline prices in light of reduced government subsidies. In the January-March quarter of 2024, the economy slumped an 0.5%, or an annualized 2.1%, for the first contraction in two quarters, hit by suspended output at Toyota group factories over a safety test scandal that had a widespread impact beyond the auto industry.

On the month, retail sales posted a 0.5% gain (consensus +1.1%) after rebounding 1.2% (revised up from +0.5%) in January, slipping 0.2% in December and rising 1.4% in November.

The Ministry of Economy, Trade and Industry upgraded its assessment for the first time in eight months, saying retail sales are on a gradual pickup trend. In the previous five months, it had said sales were taking one step forward and one step back.

Japanese retail sales are forecast to have slowed to a sluggish 1.5% rise on year in February, down from +4.4% (revised up from +3.9%) in January, as the severe winter weather chilled demand for spring clothing, prompting department store sales to post their first y/y dip in four months (-2.3% vs. +5.2% previously). The expected setback is also due to the calendar factor of a shorter shopping day compared to February 2023, when the leap-year effect led to a 4.7% jump in sales. Overall, elevated costs for food, energy and other necessities are keeping consumption sluggish.

The widely projected three-year y/y increase streak in sales values (official data don’t have volumes) is seen underpinned by a continued rebound in auto sales, lingering demand for winter clothing and heaters amid record snowfall in many regions as well as higher retail gasoline prices in light of reduced government subsidies. In the January-March quarter of 2024, the economy slumped an 0.5%, or an annualized 2.1%, for the first contraction in two quarters, hit by suspended output at Toyota group factories over a safety test scandal that had a widespread impact beyond the auto industry.

On the month, retail sales are expected to post a 1.1% gain after rebounding 1.2% (revised up from +0.5%) in January, slipping 0.2% in December and rising 1.4% in November.

Last month, the Ministry of Economy, Trade and Industry maintained its assessment, saying retail sales are “taking one step forward and one step back.”

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.