Despite an easing of COVID 19 curbs, Japan's retail sales rose for the first time in three months, though they were less than expected, and the underlying private consumption trend pointed to persistent strains on a fragile economic recovery.
After a larger than expected contraction in July-September, analysts believe that the world's third-largest economy will rebound this quarter thanks to an increase in household spending, while supply-side concerns still loom for export-reliant businesses.
As people are still wary of another virus wave, they're not going out and spending as a result, said Masato Koike, senior economist at Dai-ichi Life Research Institute, adding that stagnant wage growth is an additional obstacle to solid consumption growth.
In October, retail sales increased by 0.9 per cent from a year earlier, government data showed on Monday, versus the median market forecast for a 1.1 per cent increase. It was followed by an upwardly revised 0.5 per cent drop in September.
The headline retail figure was boosted by a 25.9 per cent increase in fuel sales due to rising petroleum product prices, while sales of goods other than fuel fell by 1.2 per cent year-on-year. Car sales were down 19.5 per cent from a year ago, the biggest monthly drop since January 2011, dragged down by supply constraints, according to a government official.
Retail sales increased by 1.1 per cent on a seasonally adjusted basis in October, following an upwardly revised 2.8 per cent gain in September.
Japan has loosened the coronavirus restrictions on restaurant hours, large-scale events and border controls because more than three-fourths of its population is fully vaccinated, and so have the restrictions on restaurant hours, large-scale events and border controls.
The comeback of consumer spending in October was gradual, according to private sector statistics, and analysts said that a full recovery in sectors hit hard by the Pandemic such as face-to- face services will take longer time.
In November, there are signs that consumers are shedding their caution, as mobility only started to surpass its 2020 level, said Marcel Thieliant, senior Japan economist at Capital Economics. Spending on services should start to recover in earnest now. The government earlier this month announced a record US $490 billion stimulus package, including cash payouts to households with children and subsidies for COVID-hit businesses, in order to boost Japan's lukewarm economic recovery.