Japanese retail sales fell in June for the fourth straight month, hurt by poor sales of clothing and bad weather, but a recent heatwave and steady demand for electronic goods are expected to underpin a recovery. Retail sales in June were down 2.9 percent from the same month a year earlier, the Ministry of Economy, Trade and Industry said on Wednesday. That was slightly weaker than economists' consensus forecast of a 2.5 percent drop. Compared with May, sales were down 0.6 percent on a seasonally adjusted basis. Sales at large stores, a key indicator of consumer trends, were down 4.9 percent from a year earlier on a like-for-like basis. "Household spending has been firm, while supply-side sales have been weak. Thus, we need to carefully look at the picture of overall consumption," said Yoshimasa Maruyama, senior economist at Mizuho Research Institute. "But there is no need to be pessimistic. Due to very hot weather in July, we hear sales of beer and air conditioners have been strong."
Wage earners spent 5.6 percent more in May than in the same month a year earlier. Latest data on household spending will be released on Friday. Government officials and economists blamed the fall in June retail sales on bad weather including typhoons and the fact that there was one less Sunday in June this year. Sunday is a popular shopping day in Japan. Despite the fourth straight month of decline, the ministry still maintained there were signs of recovery. "There is no need now to make a large change in our assessment," a METI official said, adding that wholesale sales, a leading indicator for retail sales, had been rising for some months, except for May. Wholesale sales were up 4.6 percent in June from a year earlier, boosted by robust demand for machinery from abroad and production-related equipment for electronics and automobiles at home. Personal consumption, which accounts for over half of gross domestic product, has been picking up as the economic recovery broadens and job conditions improve. That has convinced economists that a recovery in exports and manufacturing is gradually filtering through to domestic demand.
Last week the government raised its economic forecasts for the year to next March, bringing them more into line with the views of private economists. It now expects private consumption to rise by 2.6 percent in fiscal 2004/05. But some economists have doubts about the sustainability of personal consumption. "It shows how the recent upturn in spending was led by sentiment and a decline in savings, rather than a genuine improvement in wages," said Kiichi Murashima, director of economic and market analysis at Nikko Citigroup, referring to the sales trend. Takehiro Sato, an economist at Morgan Stanley, said: "Overall, retail sales and consumption should not be that weak for the rest of the year. But there are some problems." "Consumption so far has been helped by receding fears about employment. But if the recent move towards a major bank merger result in more job cuts and high-profile bankruptcies, sentiment may worsen again."///