| Consensus | Consensus Range | Actual | Previous | Revised | |
| Month over Month | 2.6% | 1.9% to 3.3% | 0.5% | -6.4% | -6.3% |
| Year over Year | -2.4% | -2.8% to -0.5% | -3.6% | -3.3% |
Highlights
Japan’s real average household spending posted its eighth straight year-on-year drop in July, down 3.6% (consensus -2.4%) after a 3.3% dip in May, as consumers remained wary of spending beyond daily necessities and purchases of automobiles took a breather after a recent pickup. On the upside, the heat wave boosted demand for air conditioners and there was higher replacement demand for washing machines. People also paid more on hotels and dining out but that may be partly due to rising fuel, labor and import costs.
Excluding home maintenance and repairs and other volatile items like vehicles and gift money, the core measure fell a smaller 1.4% (up 0.8% in nominal terms) after falling 4.3% (down a nominal 2.5%) the prior month. Autos and related items, a widely fluctuating category, pushed down overall spending by a full percentage point (mostly vehicles) after trimming June expenditures by 0.34 point (mainly lower gasoline prices).
The seasonally adjusted real expenditures index rose 0.5% on the month (consensus +2.6%) to 96.4 in July after plunging a revised 6.3% to 95.9 in June and climbing a revised 3.5% to a 12-month high of 102.4 in May. Recent figures have been revised slightly as the Ministry of Internal Affairs and Communications shifted the base year for household spending to 2025 from 2020 in line with its recent update on the base year and weighting for the consumer price index.
Details:
Japan July real household spending -3.6% y/y (June -3.3%), 8th straight fall; median forecast -2.5% (range: -2.8% to -0.6%)
Japan July real household spending s/a +0.5% m/m (June revised -6.3%), 1st rise in 2 months; median forecast +2.3% (range: +1.9% to +3.3%)
Japan July real core household spending (ex-housing, vehicles, gift money) -1.4% y/y vs. -4.3% in June when overall spending fell 3.3%
Japan July household spending y/y fall as auto purchases slip after recent pickup, home repairs and maintenance drop
Japan July household spending on air conditioners up amid heat wave; hotels, dining out also up but not strong enough to lift total spending
Japan July average real household income -3.8% y/y (June +2.0%); -1.7% in nominal terms (June +3.9%)
Market Consensus Before Announcement
Japan’s real household expenditure is expected to decline for an eighth straight month in July as consumer sentiment remained cautious amid increasing signs of accelerating inflation, raising cost-consciousness among households and potentially intensifying their desire to save more to protect their finances for the future.
Real spending by households of two or more persons is expected to fall 2.4 percent on the year in July after dropping 3.3 percent a month earlier, when consumers spent less on health insurance premiums, airfares and gasoline. Typhoon-related weather and lower temperatures compared with a year earlier also dampened sales of clothing and appliances, including air conditioners.
On the month, household spending is expected to rebound 2.6 percent in July following an unexpected 6.4 percent drop a month earlier. It rose 3.7 percent in May and 1.6 percent in April after falling 1.3 percent in March.
There appears to be a mixed bag of factors affecting spending in July, with some positive signals seen in department store sales as demand for summer items, including clothing, increased. Consumption also appeared to have risen as households bought souvenirs to take back to their hometowns during the summer holidays and purchased food for summer vacations and trips.
Meanwhile, supermarket sales rebounded in July from the previous month, but gains were modest as consumers appeared to become more cost-conscious amid broad-based increases in costs. Rising procurement, packaging and labor costs appear to have pushed prices higher at supermarkets and affected consumers’ minds.
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.