Japan’s retail sales slumped for a second month in August as demand for appliances and autos fell, a sign that consumers’ concern about looming tax increases may be weighing on spending.
Sales slid 1.7 percent from a month earlier, the trade ministry said in Tokyo today, the steepest decline since March. The median estimate of nine economists surveyed by Bloomberg News was for a 0.2 percent increase. Sales decreased 2.6 percent from a year earlier.
A deterioration in consumer spending may weigh on the recovery in the world’s third-largest economy from the March 11 earthquake as such outlays make up more than half of gross domestic product. With consumers unable to boost demand, the export-led recovery is vulnerable to a global slowdown spurred by the European debt crisis and a weakening U.S. economy.
“Consumer spending was recovering after the quake, but that rebound is pretty much over,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “Spending may begin to be a drag on the economy in the long term as households refrain from spending in anticipation of higher taxes."
The yen traded at 76.52 per dollar as of 10:31 a.m. in Tokyo.
Fast Retailing Co., Asia’s biggest apparel chain, said this month same-store sales at its Uniqlo casual clothing stores in Japan fell 9.4 percent in August from a year ago as cooler temperatures led to sluggish sales of summer clothing.
Japan plans total spending of 19 trillion yen ($247 billion) over five years for reconstruction after the magnitude- 9 temblor and tsunami that devastated the northeast coast. The nation’s ruling Democratic Party of Japan this week proposed a 9.2 trillion yen temporary tax increase and selling of state assets to pay for rebuilding.
Household sentiment has also been waning, with the nation’s economy watchers survey showing confidence among merchants and others who deal with consumers slipping to 47.3 in August, the first drop since March.
Sales of autos and transactions in department stores were among categories that dragged down August’s figures, today’s report showed. Sales of machinery and appliances fell 19.3 percent while those for autos dropped 18.8 percent, the report showed.
Vehicle sales in Japan may drop 14 percent this year after the march disaster cut production and demand, the Japan Automobile Manufacturers Association said on Sept. 27. A separate government report tomorrow is forecast to show that household spending fell for an 11th month in August.
Still, some retailers are predicting a rebound in sales. Seven & I Holdings Co., Japan’s largest retailer, earlier this month raised its net income projection 15 percent to 121 billion yen, citing higher demand as the nation recovers after the March quake and nuclear disaster.
The nation’s economy shrank for a third straight quarter through June. It’s expected to grow at a 4.6 percent annual pace in the three months through September, according to the average forecast of 42 economists surveyed by Japan’s government- affiliated Economic Planning Association.
The International Monetary Fund this month cut its forecast for global growth to 4 percent for 2011 from a June estimate of 4.3 percent, and said ‘‘downside risks are growing” as Europe’s debt crisis widens.
Japan’s recovery is “completely dependent on overseas,” said Jin Kenzaki, vice president of economics at Citigroup Global Markets Inc. in Tokyo. “Although public investment and housing demand is set to increase, those are just making up for what was lost. Fundamentally, the economy has not turned around at all.”
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