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Japan consumer confidence hits all time lows - again - in July

In June we saw Japan’s consumer confidence fall to an all-time low. July’s figures, released yesterday by the Cabinet Office, show that a new all-time low has been reached. The general consumer confidence index figure fell from 32.6 in June to 31.4 in July, for a drop of 1.2 points. Talk of an economic stimulus package from the government has certainly not raised hopes amongst consumers, who continue to deal with higher energy and food prices.

The Consumer Confidence Index itself contains five scores, each of which is considered positive when above 50, and pessimistic when below the 50 mark. Here’s a breakdown for July’s figures, with the change from last month:

• Consumer Confidence Index: 31.4 (-1.2)
• Overall Livelihood: 29.3 (-1.0)
• Income Growth: 36.3 (-0.2)
• Employment: 30.7 (-2.1)
• Willingness to buy durable goods: 29.2 (-1.7)

As with May and June, we saw all five scores fall, though the “Income Growth” category is still falling at less of a rate than the others. For the sake of comparison, let’s take a look at how each score has changed compared to where they were a year ago:

• Consumer Confidence Index: -13.0
• Overall Livelihood: -18.4
• Income Growth: -5.6
• Employment: -16.8
• Willingness to buy durable goods: -16.8

“Overall livelihood” has now hit an all-time low for four consecutive months, and in July we saw the score below 30 for the first time ever. “Willingness to buy durable goods” also fell below the 30 point level for the first time ever. Although the “employment” score is also flirting with the 30 point level, it is nowhere near its all-time low of 19.0 points that was seen in December 2001.

The only possible good news on the horizon is that oil prices are not as high as they were a month ago. Still, given the fact that Japan’s GDP was actually negative in the second quarter, it seems as though it will be some time yet before consumers begin to feel better about their situation. With about 55% of Japan GDP being derived from domestic consumer spending, it behooves the government at this point to come up with concrete measures to restore confidence and guide the economy back on track.

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