| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | -0.3% | -0.4% to 1.4% | 0.1% | 0.5% |
| Year over Year | -4.2% | -4.4% to -2.4% | -3.1% | -3.6% |
Highlights
Japan’s real average household spending posted its ninth straight year-on-year drop in August, down 3.1% (consensus -4.2%), after falling 3.6% in July, as consumers remained wary amid rising costs of living and stormy weather wreaked havoc in many regions. Cooler weather dampened demand for summer clothing, air conditioners and other seasonal goods.
More markups in groceries and other necessities are expected in coming months as the Iran war has boosted energy costs and the weak yen has pushed up import prices. Firms are also reflecting higher labor costs in retail prices. Consumers are also being hit by sharp price hikes for computers and smartphones amid global shortages of memory chips.
Excluding home maintenance and repairs and other volatile items like vehicles and gift money, the core measure fell 4.2% (down 2.1% in nominal terms) after falling 1.4% (up a nominal 0.8%) the prior month. Autos and related items, a widely fluctuating category, pushed up overall spending by 0.13 percentage point (mostly vehicles) after trimming July expenditures by a full percentage point (mainly vehicles).
The seasonally adjusted real expenditures index edged up 0.1% on the month (consensus -0.3%) to 96.5 in August after rising 0.5% to 96.4 in July, plunging 6.3% to 95.9 in June and climbing 3.5% to a 12-month high of 102.4 in May.
Details:
Japan Aug real household spending -3.1% y/y (July -3.6%), 9th straight fall; median forecast -4.2% (range: -4.4% to -2.4%)
Japan Aug real household spending s/a +0.1% m/m (July +0.5%), 2nd straight rise; median forecast -0.3% (range: -0.4% to +1.4%)
Japan Aug real core household spending (ex-housing, vehicles, gift money) -4.2% y/y vs. -1.4% in July when overall spending fell 3.6%
Japan Aug household spending y/y fall led by lower private university tuition, domestic package tour costs, subsidized electricity bills
Japan Aug household spending shows y/y rise in money for children studying away from home, higher auto purchases, high school education support
Japan Aug average real household income -0.9% y/y (July -3.8%); +1.3% in nominal terms (July -1.7%)
Market Consensus Before Announcement
Japanese households are becoming increasingly cautious about spending as upward pressure on prices shows few signs of easing. Real spending by households of two or more persons is expected to drop for the ninth straight month on the year in August, while cooler temperatures may have limited purchases of summer-related items.
Several indicators pointed to a slowdown in consumer spending in August. New passenger car registrations slowed, while nationwide supermarket sales rose only slightly. Meanwhile, sales growth at nationwide department stores and convenience stores also slowed, underscoring that rising prices may be making households more cautious about spending.
In addition, natural disasters, including a powerful magnitude 7.1 earthquake that struck Kumamoto on Japan’s southern main island of Kyushu in late July and heavy rain and flooding in Chiba in mid-August, as well as lower temperatures in central and northern regions, including Tokyo, could have affected sales of summer-related items.
August real household spending by two or more persons is forecast to drop 4.2 percent on the year after falling 3.6 percent a month earlier. On the month, spending is expected to fall 0.3 percent for the first decline in two months after rising 0.5 percent in July.
In July, consumers were wary of spending beyond daily necessities, while automobile purchases took a breather after a recent pickup. On the upside, the heat wave boosted demand for air conditioners, while replacement demand for washing machines also increased. People also spent more on hotels and dining out, although the increases may have been partly driven by higher fuel, labor and import costs.
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.