Oct. 12 (Bloomberg) -- Japanese household sentiment barely rose from a three-year low in September, a signal that consumer spending is unlikely to accelerate.

An index that measures confidence among households with two or more people edged up to 44.1 points last month from 44 in August, halting a four-month slide, the Cabinet Office said in Tokyo today. The median estimate of nine economists surveyed by Bloomberg News was for an increase to 44.5. A number below 50 signals pessimists outnumber optimists.

Gloom among consumers, whose outlays account for more than half of the economy, suggests spending at home may fail to spur growth should a global slowdown damp exports. Household confidence has been battered by sliding pay, a tax increase and the government's loss of pension records. Families may also feel the pinch from rising prices of bread and instant noodles.

``The bad news about pensions and taxes is just adding up,'' said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. Wages aren't rising even as companies' profits are increasing, ``so people are thinking: it's not going to get any better than this.''

The yen traded at 117.20 per dollar at 2:22 p.m. in Tokyo from 117.29 before the report was published.

Wages dropped in the first seven months of this year and fell about 10 percent in the past decade. Pay rose 0.1 percent in August as workers put in overtime hours to make up for a production slump caused by an earthquake in the previous month.

Bread, Noodle Prices

The government admitted in May that it lost pension records and in June ended temporary tax breaks. Recent increases in prices of everyday food items including bread, mayonnaise and instant noodles could also take its toll on household sentiment.

Economic and Fiscal Policy Minister Hiroko Ota said today that the government is monitoring the effect of higher food prices on consumers and small companies. The higher cost of some food items is ``worrisome,'' she said.

Yamazaki Baking Co., Japan's largest bread and pastry maker, this week said it would raise prices for the first time in 17 years to cope with soaring wheat costs. Noodle makers including Nissin Food Products Co. announced increases last quarter.

``Rising prices for everyday things like bread means sentiment will probably stay depressed,'' said Hiroshi Shiraishi, an economist at Lehman Brothers Japan Inc. in Tokyo. ``People are starting to notice.''

Confidence among consumers including single-person households was unchanged at 44.1, the government said. That survey has only been available since 2004.

Economy Watchers

Barbers, shopkeepers and other merchants who deal directly with consumers became the most pessimistic in four years in September, the Cabinet Office's Economy Watchers report showed this week. People surveyed said they expect conditions to deteriorate in the coming months.

Still, a tightening job market suggests spending could pick up. Japan's 3.8 percent jobless rate is near a nine-year low.

The country's largest companies expect the worst labor shortages in 15 years, according to the central bank's quarterly Tankan business survey. Bank of Japan Governor Toshihiko Fukui has said that the demand for workers will start to drive wages higher, supporting consumers.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

Last Updated: October 12, 2007 01:23 EDT