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Household spending down 2.7% in April; spending on services down again

Last Friday, the Statistics Bureau released its household spending figures for April. Apparently, these figures surprised many observers, who were looking at something in the range of a 1% fall year-on-year. The 2.7% reported fall in April household spending came as no surprise in these quarters, as the reasons for steep decline were laid out in last month’s post on this topic.

April was thus the second month in a row with a drop in household spending, after it fell 1.6% in March. According to the Statistics Bureau, spending at households with two or more people came to 310,695, down 2.7% from a year ago. Income at households with a salaried worker as head of household came to 469,774 yen, which was down 1.6% from a year ago, while spending at workers’ households was at 343,586 yen, down 0.6% from last year.

Here’s a breakdown of spending per category, along with changes against April of last year:

Culture & recreation: 33,218 yen (+5.0%)
Transportation & communication: 40,650 yen (+2.3%)
Furniture & Household Goods: 8,828 yen (+0.3%)

Medical care: 12,450 yen (+0.7%)
Fuel, electric and water: 23,773 yen (-0.9%)
Food: 66,374 yen (-3.1%)
Clothing & footwear: 12,778 yen (-4.1%)
Education: 24,356 yen (-5.6%)
Housing: 16,251 yen (-7.2%)
Other: 72,018 yen (-7.3%)

Last month, we saw an increase in five categories and a decrease in the same number. Household spending had taken a beating, and was down 22% in March. It seems to have recovered somewhat in April. The surprises here, however, are the figures for utilities and food. We know that upward price pressure exists in both of these categories, yet both fell year-on-year. Although we’d have to go into much more detail to see why, some educated guesses can be made. First, this April was mild, and there was most likely little need for either heating or air conditioning in many parts of Japan. To be honest, I cannot remember what the weather was like in April 2007, though I do know that I have not turned on any heat or air conditioning since March.

In terms of food, perhaps we are seeing households tighten their belts and shop cheaper. Recent polls have suggested that this is how shoppers are thinking, so that would be no surprise. Again, this needs to be examined in further detail.

As we did in the last two months, let’s take a look at how spending on durable and semi-durable items fared in April:

	Goods and Services	Goods Only	Durable & Semi Durable Goods	Services Only
December	+2.34%	+0.99%	+.97%	+4.20%
January	+4.39%	+2.98%	+8.09%	+6.40%
February	+1.30%	+4.76%	-3.65%	-3.28%
March	-0.90%	-0.51%	-10.41%	-1.43%
April	-1.16%	-0.10%	-6.56%	-2.35%

Spending on services continues to decline. In April it was a stronger decline than March, and more than offset a reduced decline in spending on goods. With lower income levels reported for April and prices still showing no sign of flattening out, it seems hard to predict anything other than a fall in household spending again in May. In May 2007, household spending stood at 293,231 yen, and had been driven up 0.4% on the year in part due to increased education expenditures which should now be worked out of the system.

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