apanese retail sales fell slightly more than expected in August as typhoons kept customers away from stores and a heatwave hurt clothing sales, adding to views the economy is losing some steam. Retail sales fell 1.8 percent in August compared with the same month a year earlier, government data showed on Wednesday. That was slightly weaker than a 1.4 percent drop forecast by economists in a poll. "It was weak, but it was to be expected because of the weather in August, with the typhoons et cetera," said Naomi Hasegawa, senior fixed income strategist at Mitsubishi securities. "The question is whether this will continue." Compared with July, retail sales fell 0.1 percent on a seasonally adjusted basis, the Ministry of Economy, Trade and Industry (METI) said. Japan's economy grew a real price-adjusted 1.3 percent in annualised terms for the April-June quarter, and is showing signs of slowing after two quarters of some seven percent growth. Economics Minister Heizo Takenaka said on Tuesday that he did not expect the Japanese economy to fall into a tailspin, despite the recent string of weak economic data. He also expressed concern about a prolonged rise in crude oil prices, saying it could pose a threat to Japan's economy.
U.S. oil future prices surged to a record above $50 a barrel in Asia on Tuesday as Nigeria emerged as the latest focus for worries about supply in an already tight worldwide energy market. As well as oil prices, exports -- the main driver of Japan's growth -- have also slowed, though economists expect the economy to continue recovering steadily in the coming months, albeit at a slower pace. They also say growth will be able to hit the government's forecast of some 3.5 percent growth for the fiscal year ending next March. Economists said that weather served as a prominent factor for declines in retail sales this year, but pointed out that previous expectations for brisk consumer spending in July and August were overdone. "It seems that the impact of the summer heatwave and the Olympics has waned. Other data has shown that strong demand for DVD players and flat-screen televisions in recent months is starting to moderate," said Kiichi Murashima, director of economic and market analysis at Nikko Citigroup. "Perhaps consumers chose to stay at home once the Olympics started," he added.
RECOVERY TREND
METI left its assessment unchanged that retail sales are on a recovery trend. "The figures are in line with our assessment as not all sectors are negative -- there are increases in automobiles and fuel products. The decline in August was partly a reaction to a spurt in July and also stemmed from some one-off factors such as weather," a METI official said. Personal consumption accounts for over half of Japan's economy and has been boosted somewhat as job conditions improve, but strong gains are seen unlikely due to sluggish gains in household income. Financial markets reacted little to the data, focusing on Japan's industrial production figures due on Thursday and the Bank of Japan's "tankan" corporate sentiment survey on Friday. Concerns about the strength of Japan's recent recovery, coupled with recent falls in Tokyo share prices and higher oil prices, have helped push down yields on Japanese government bonds and weaken the yen. But some industry leaders remained upbeat. "It's not going to get heaps stronger but the current gentle pace of recovery should continue," Toyota Motor Corp President Fujio Cho said on Tuesday, when asked for his views on the upcoming "tankan" survey. "If you look at corporate earnings, then there are a lot of companies putting in good performances and there is strength in that." After retail sales saw their first year-on-year increase in five months in July, sales in August were hit by a drop in sales of clothing, air conditioners and refrigerators despite higher sales of DVD players and flat-panel TVs. Sales at large stores, another indicator of consumer trends, fell 5.4 percent from the same month a year earlier on a same-store basis, the six straight month of year-on-year decline.///