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Japan’s retail sales boosted; Japan’s retail sales drop

You would be forgiven for raising an eyebrow at the two headlines published by Bloomberg today: 1) Japan’s Large Retailers Boost Sales on Warm Weather and 2) Japan Retail Sales Drop; Heating-Fuel Demand Declines.

The first headline refers to a Ministry of Economy, Trade and Industry report released today that shows sales at large shops in Japan increasing 0.5% in February versus a year earlier. This is the first such increase in five months. If data from new stores is included, sales rose 1.6% (new store data is usually excluded from market research).

This is certainly an improvement, albeit slight, and looks like a positive sign for the future of consumer spending. Bloomberg quotes Hiroshi Shiraishi, an economist at Lehman Brothers Japan, as saying:

Large retailers are losing market share, so the fact that the number comes in strong says something positive about spending. The contribution of exports will fade and household spending will pick up a bit.

The Ministry said that retail sales are basically flat, though there are some positive signs, including the fact that this report excludes spending on services and the Internet, both of which are believed to be healthy.

The second headline, despite being somewhat more negative in tone, actually covers the same set of reports from the Ministry. Overall, sales at shops in Japan declined by 0.2% in February from a year earlier. The mood of those quoted in the article, however, is still positive:

Akira Maekawa, economist at UBS Securities Japan:

Private consumption will underpin stable economic growth, even though we’re expecting a slowdown in exports and capital spending.

Why the bearishness on capital spending? I’d like to see the indicators showing that it’s about to go into a slowdown. As for exports, they’ve been on the rise as a percent of GDP for some time now; why the sudden expectation of a slowdown? Is it due to an expected slowdown in the global economy?

Naoki Murakami, senior economist at Goldman Sachs Japan:

The retail survey has a slightly negative bias, so I’m not worried about a negative number. Department store sales are a better reflection of actual consumption.

Department store sales comprise 8% of the total retail figure. Is this to mean that sales results at other retail outlets are expected to follow? Unfortunately, Bloomberg doesn’t provide us with any more of the quote.

Seiji Adachi, a senior economist at Deutsche Securities:

[The report] doesn’t tell a whole story of consumer spending as more people are spending on services. This is a minor drop and still indicates consumer spending is recovering. Corporate profits are gradually spreading to households.

I’d really like to believe this, but simply saying that people are spending more on services isn’t very convincing. Is there any data to back that up?

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