Household spending in February 2016 in Japan rose year-over-year for the first time in six months. That was the sum total of any good economic news for the monetary-stricken economy, and it doesn’t really survive closer inspection. The rise in spending was due largely to “other” activities you don’t associate with strong economic rebounds. The overall figure was just +1.6% in nominal terms and +1.2% in real terms, but that was due largely to a 6% jump in spending on food, +13.8% in spending on medical care, and +20% on education (all nominal changes).
Those gains were balanced by the usual digression in household circumstances, including a 10% drop in spending on fuel, light and water, -4.3% in furniture and utensils, and -4.0% on clothing and footwear. This breakdown across spending categories explains the big difference in the broader category of household spending against the more economically-sensitive retail sales estimates that fell 2.3% month-over-month (seasonally adjusted).
Household income declined yet again in February, down 2% in nominal terms and 2.4% adjusted for the CPI. Disposable household income, factoring taxes, was even worse at -3% nominal and -3.4% “real.” The income numbers suggest retail sales are probably closer to the actual economic baseline for Japanese consumers.
Unfortunately, Japanese industry has now taken to the plunge as well. Japanese industrial production declined an enormous 6.1% (M/M) in February from the usual positive January. That was the largest monthly contraction since the 2011 earthquake/tsunami, except that the only disruption this time is decidedly unnatural. In unadjusted, year-over-year terms, IP has declined in six of the past seven months and has been positive in only four of the last twenty.
Some of the decline in February can be attributed to steel disruption at one plant that halted Toyota’s production runs for a time, but that was at the margins of both weak internal “demand” as well as the ongoing plunge in exports (echoing China’s view of global, including US, “demand”).
