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Japan retail sales miss expectations as customers tighten purse strings
ANNUAL growth in Japanese retail sales slowed in May to its lowest in seven months, adding to worries about weak consumer spending that caused a first-quarter economic contraction.
The 0.6 per cent annual increase in retail sales in May was weaker than the median estimate for a 0.9 per cent gain, following a revised 1.5 per cent increase in April. May's result marked the slowest growth since a 0.2 per cent decline last October.
"Consumption is picking up gradually from the temporary decline at the start of the year but its rebound is weak due to sluggish wages," said Azusa Kato, senior economist at BNP Paribas Securities.
"Employees' incomes are on the rise as a whole with many elderly and women joining the labour force as part-timers. But they don't have enough purchasing power to drive consumption."
On a seasonally adjusted basis, retail sales declined 1.7 per cent in May, data from the trade ministry showed on Thursday. Japan's economy is expected to bounce back in April-June from the first-quarter contraction that ended the longest growth run since the 1980s bubble economy.
Analysts said the slump was caused by one-off factors such as bad weather and saw it as temporary.
The trade ministry data showed on Thursday that growth in fuel sales led May's retail sales, reflecting higher gasoline prices, while spending on items such as clothes and cars declined in May from a year earlier.
While risks to the export-reliant economy abound, not least from a heated China-US trade dispute that has roiled financial markets, weak domestic demand is a worry for policymakers struggling to stoke sustainable inflation.
A rise in private consumption that constitutes about 60 per cent of the economy could lift consumer prices, which may help the Bank of Japan accelerate inflation to its elusive 2 per cent target.
A tight labour market has not yet fuelled growth in wages, keeping Japan's thrifty consumers from splashing out, which in turn causes inflation to stay low.
Japan's annual core consumer inflation, which includes oil products but excludes volatile fresh food prices, held steady at 0.7 per cent in May, well below the BOJ's 2 per cent price goal, data out last week showed.
With inflation remaining stubbornly subdued despite more than five years of massive monetary easing, the BOJ is lagging well behind other central banks in unwinding crisis-mode stimulus.
The central bank will scrutinise upcoming data at its rate review in July, at which the nine-member board will conduct a quarterly review of its long-term growth and price outlook and analyse factors behind stubbornly slow inflation. REUTERS