(Bloomberg) -- Japanese households cut spending for a third month in July as the spread of the delta variant prompted the government to call another state of emergency.
Spending dropped 0.9% from the previous month on a seasonally adjusted basis, the internal affairs ministry reported Tuesday. Compared with 2020’s depressed level, outlays increased 0.7%, missing the median estimate from economists.
A separate report showed wages increased for a fifth month in July compared with last year’s levels, pushed up by a double-digit increase in overtime pay.
Key Insights
- Another drop in household spending suggests the highly contagious delta variant may be making consumers more cautious. Last quarter, shoppers shrugging off government warnings on the virus helped Japan avoid a recession while also spreading the disease.
- Prime Minister Yoshihide Suga last week announced his resignation amid criticism over his handling of the pandemic. Calls are growing within the ruling party for another economic stimulus package with national elections due this fall.
- A record wave of the virus that hit during summer is subsiding somewhat, but the government is reportedly considering extending the current state of emergency, Japan’s fourth, for a few weeks beyond the current end-date of Sept. 12.
- The government expects to get about 60% of the country fully inoculated by the end of this month, up from about 47% now. Policy makers are planning to ease Covid-19 restrictions as early as October, according to a Yomiuri report.
“We see spending extending declines in year-on-year terms in August, weighed down by lower bonuses and expanded virus-containment measures.”
--Yuki Masujima, economist
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- Cash earnings gained 1% from a year ago. Adjusted for inflation, they increased 0.7%.
(Adds detail on wages.)
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