Japan’s retail sales unexpectedly fell last month from the previous month for the first drop in five months as pent-up demand started to cool amid rising prices, outweighing a boost from the return of tourists.
Spending slipped 1.1 percent from October with outlays on clothing falling in a milder-than-usual month, the Japanese Ministry of Economy, Trade and Industry said.
Economists had expected sales to eke out a 0.2 percent gain.
Photo: AFP
Strengthening inflation has been cited by analysts as a factor that would increasingly weigh on spending in real terms.
Separate figures showed the unemployment rate edged down to 2.5 percent as Japan’s labor market continued to show signs of tightness.
However, the availability of jobs remained unchanged, a reading that suggests employment conditions might not be strengthening at a sufficient pace to put the kind of upward pressure on wages sought by the government and central bank.
“Retail sales had been stronger than expected due to the rebound from the summer virus surge and government travel support,” Meiji Yasuda Research Institute chief economist Yuichi Kodama said. “However, it’s now becoming apparent that rising prices may be gradually weighing on consumer spending.”
Retail receipts were still up 2.6 percent from a year earlier, but the figures were inflated by the strongest inflation in four decades and they came in well below a 3.7 percent consensus estimate.
A ministry briefing said that recovering inbound demand was now back to about 70 percent of pre-pandemic levels.
The unemployment figures showed a slight fall in the labor participation rate to 62.4 percent last month from the previous month, a decline that contributed to the lower unemployment rate.
Job availability remained at 1.35, meaning there were 135 jobs available for every 100 applicants.
While that is an indication of a tight labor market, it is still well below pre-pandemic levels.
“Even if employment is tight, because companies can’t see good medium to long-term growth prospects due to uncertainties in the economy, they can’t take steps to boost base salaries, a move that would lead to higher fixed costs,” Kodama said.
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