Japan: October retail sales boosted by soaring fuel prices, overall trend remains weak

A woman walks past a fashion store in a shopping district in Tokyo, Japan, September 29, 2016. REUTERS / Toru Hanai

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  • October retail sales up 0.9% yoy vs f’cast + 1.1%
  • Retail sales up 1.1% m / m seasonally adjusted
  • Consumption has yet to pick up after COVID restrictions eased

TOKYO, Nov.29 (Reuters) – Retail sales in Japan rose for the first time in three months in October, although less than expected, and the underlying trend in private consumption indicated lingering tensions over a recovery fragile economy despite an easing of the brakes linked to COVID-19.

After a larger-than-expected contraction in July-September, analysts expect the world’s third-largest economy to rebound this quarter on a pickup in household spending, while supply-side concerns still weigh on export-dependent companies. Read more

“However, as people are still wary of another wave of viruses, they don’t actively go out and spend,” said Masato Koike, senior economist at the Dai-ichi Life Research Institute, adding that the stagnation of growth wages is an additional obstacle to promoting strong consumption growth.

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Retail sales rose 0.9% in October from a year earlier, according to government data released on Monday, compared to the market’s median forecast for an increase of 1.1%. It followed a revised upward 0.5% drop in September.

A 25.9% increase in fuel sales due to higher prices for petroleum products boosted overall retail sales, while sales of non-fuel goods fell 1.2% year-on-year annual. Worryingly, car sales fell 19.5% from the previous year, the biggest monthly drop since January 2011, driven by supply constraints, according to a government official.

Relative to the previous month, retail sales increased 1.1% on a seasonally adjusted basis in October, following an upward revised gain of 2.8% in September.

Japan has eased coronavirus-related restrictions on restaurant opening hours, large-scale events, and border controls as infections have dropped dramatically and more than three-quarters of its population are fully vaccinated. Read more

Private sector statistics, however, had shown that the return in consumer spending was gradual in October, and analysts said a full recovery in sectors hit hard by the pandemic, such as face-to-face services, will take longer. Read more

“Indeed, there are signs that consumers are finally abandoning their caution as mobility only started to surpass its 2020 level in November,” said Marcel Thieliant, senior Japanese economist at Capital Economics. “Spending on services should finally start to rebound in earnest now.”

To boost Japan’s lukewarm economic recovery, the government earlier this month announced a record $ 490 billion stimulus package, including cash payments to households with children and subsidies to businesses affected by COVID. Read more

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Reporting by Kantaro Komiya and Yoshifumi Takemoto; edited by Richard Pullin & Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.


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