Japan household spending falls as COVID-19 curbs sap economic recovery

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TOKYO (Businesshala) – Japan’s household spending fell faster than expected in August as a state of emergency restrictions to deal with the coronavirus pandemic weighed on consumption during the summer holiday season and risk undermining the economy’s recovery. Was.

FILE PHOTO: People look through the windows of an apartment store in a shopping district in Tokyo, Japan June 29, 2016. Businesshala/Toru Hanai/File photo

Friday’s government figures are ill-fated with new Prime Minister Fumio Kishida’s efforts to revive the pandemic-hit economy and distribute more money to households through higher wages.

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The 3.0% year-over-year reduction in spending was worse than an average market forecast for a 1.5% decline and followed a 0.7% increase in July.

Month-on-month data showed a 3.9% contraction in August, the fourth straight month of decline, and compared expectations of a 2.0% decline.

The COVID-19 infection and subsequent restrictions hampered the consumption of a wide range of goods from restaurant dine-ins and fashion items to furniture across the country, a government official said. Said that the rainy season also discouraged the visit of customers to the shops.

“What’s more, supply chain issues have started affecting private consumption, as car sales have been declining since August; It was worse in September,” said Takumi Tsunoda, senior economist at the Shinkin Central Bank Research Institute, referring to automobile industry data.

“Service spending bounced back in September as infections eased and more people are active outside, but a large drop in car sales could sap the momentum for recovery,” Tsunoda said, adding that sales of consumer electronics such as smartphones also supply. may be affected by. chain interruption.

Consumption has been a weak spot for the world’s third-largest economy as a spike in delta-type cases and a state of emergency restrictions barred households from shopping or eating out. Japan’s service sector activity declined for the 20th straight month in September, according to a recent private survey.

But analysts expect consumption to improve in the coming months as the lifting of restrictions from October and steady progress in immunizations has raised hopes of a pick-up in demand.

However, the economy faces fresh constraints from supply constraints, as a shortage of semiconductor chips and parts hampers automobile production, hurting exports.

After an annualized growth of 1.9% in the second quarter, analysts expect the July-September slowdown to be mainly on the back of weak private consumption.

Separate data on Friday showed inflation-adjusted real wages rose 0.2% in August from the same month a year earlier, largely due to the statistical base effect.

“Wages should increase in the coming months as the labor market tightens and vaccines allow a full recovery in overtime and bonus payments,” said Tom Learmouth, Japan economist at Capital Economics.

Reporting by Kantaro Komiya; Writing by Leika Kihara; Editing by Shri Navaratnam

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