Japanese Consumers Slow On Retail Spending

While the country’s latest data on retail sales beat expectations, the numbers point to a slowing demand amongst Japan’s consumers.

The world’s third-largest economy saw an annual 0.9 percent rise for retail sales in June, exceeding analysts’ expectations for a 0.5 percent increase but still showing a sharp decline from the previous month, CNBC reported Tuesday (July 28).

The government’s data marks Japan’s June report as the second consecutive month of weakening demand.

“The renewed drop in retail sales in June adds to the evidence that consumer spending fell last quarter,” Marcel Thieliant, Japan economist at Capital Economics, said in a note seen by CNBC.

“What’s more, sales values have been flattered by a rebound in gasoline prices. Retail gasoline prices have risen by 6 percent since their January peak. Since fuel sales account for around 8 percent of total retail sales, this has lifted aggregate sales by around 0.5 percent,” Thieliant added.

The reported data arrived just days after Japanese officials reduced the outlook for consumer prices.

According to CNBC, the government now expects a 0.6 percent rise in consumer prices for the 2015 fiscal year, showing a drop from the previous estimate for a 1.4 percent increase. An ongoing decline in oil prices is reportedly behind the officials’ downgraded forecast.

But Capital Economics said investors should resist the urge to place too much value on retail sales as an indicator of the country’s overall consumer spending.

“We would instead pay more attention to core household spending, due on Friday. This measure of consumer expenditure has done a good job lately in explaining moves in the Cabinet Office’s synthetic consumption expenditure, the monthly equivalent of private consumption as measured in the national accounts,” the group told CNBC.

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