December household spending up 2.2 percent, household income down 2.7 percent

January 31, 2008
By Ken Worsley

After Japan’s average household spending fell 0.6% in November and energy and food prices continued to rise, most forecasters had predicted that December’s figures would show lower growth, or perhaps slide back into negative territory. However, contrary to such expectations, December’s household spending figures showed a rise of 2.2% from the previous year, reaching 351,667 yen, according to data released by the Statistics Bureau.

At the same time, household income took a hit in December, slipping 2.7 percent, as the income of household heads declined 2.0 percent. At the same time, income from bonuses fell 1.1 percent and disposable income was 3.6 percent lower than a year ago. These figures leave little room to be optimistic for January’s spending figures.

We have to admit that these numbers initially seemed surprising, as we suspected growth in household spending would be restrained by belt-tightening as the winter truly hit. We know that average wages showed a 0.1% uptick in November, but that hardly seems like enough to have caused a spending spree. So what did households increase their spending on in December? Here’s a breakdown:

Clothing and Footwear: -5.8% (14,816 yen)
Medical Care: -3.6% (14,388)
Fuel, Light and Water: -1.8% (24,151)
Education: -1.2% (9,756)
Food: -0.4% (84,130)

Transportation and Communication: +2.7% (41,443 yen)
Furniture and Household Utensils: +4.0% (13,892)
Housing: +4.5% (24,341)
Culture and Recreation: +8.2% (37,717)
Other: +5.6% (87,032)

These figures might come as somewhat of a surprise. Despite all the talk of higher oil, gas and food prices, spending on those items decreased in December when measured against a year ago. That might be due to household belt-tightening measures, which could be supported by the decline in spending on clothing and footwear. The large increase in “Culture and Recreation,” however, seems to suggest a tad of free spending.

But will that spending spill over into January, especially given the decline in December wages and bonuses?

Filed Under Economic Reports, Household Spending, Labor and Wages