Sept. 18 (Bloomberg) -- Demand for services in Japan fell in July as typhoons and declining wages kept shoppers away from stores and amusement parks.

The tertiary index, a gauge of money households and businesses spend on services ranging from phone calls to leisure, slipped 0.5 percent from June, the Trade Ministry said today in Tokyo, matching the median estimate of 27 economists surveyed by Bloomberg News.

A series of storms that fell on weekends were a drag on spending in July, causing the biggest slump in retail sales in more than two years. Consumers are unlikely to step up purchases in coming months, even with the jobless rate at a nine-year low, because companies have kept a tight lid on paychecks.

``The weather was certainly a factor but, regardless, consumption hasn't been that impressive,'' Junko Nishioka, an economist at ABN Amro Securities in Tokyo, said before the numbers were released. ``Wages have been stagnant and this is weighing on consumer spending.''

Demand for retail services led the decline, falling 1.9 percent from June. Demand for accommodation and dining out slumped 3.4 percent.

The yen traded at 115.04 per dollar at 9:03 a.m. in Tokyo from 115.00 before the report was published.

Typhoon Man-Yi

Flights were canceled and thousands of people were evacuated from their homes when Typhoon Man-Yi swept across Japan on July 13, ruining plans for consumers on the month's only three-day weekend.

All Nippon Airways Co. and Japan Airlines Corp., the nation's largest domestic carriers, canceled more than 200 flights as a result of the storm.

Retail sales were constrained by the weather, with purchases sliding 2.2 percent in July. Household spending, another gauge of consumer outlays, fell for the first time this year in July.

Consumers cut back on leisure spending in the month, going to fewer amusement parks, pachinko parlors and movie theaters, according to a survey released by the Trade Ministry this month. Economists use the survey to gauge tertiary activity.

Wages have fallen every month this year, and dropped the most in three years in July.

Declining share prices have also contributed to weaker sentiment among consumers, according to economists including Yoshimasa Maruyama at BNP Paribas Securities Japan Ltd.

Consumer confidence fell to a two-year low in July as the Topix index slid 3.9 percent in the month. Since then, stocks have tumbled another 10 percent, signaling that sentiment is unlikely to pick up in the coming months, ABN's Nishioka said.

To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net

Last Updated: September 17, 2007 20:05 EDT