Japan’s thrifty households to drag on recovery prospects: Reuters poll By Reuters

By Tetsushi Kajimoto

TOKYO (Reuters) – Growth in Japanese household spending probably slowed to a crawl in May, data will show next week, underscoring weak private consumption which could hamper a sustainable economic recovery.

Internal affairs ministry data due next Friday is likely to show that all household spending in May rose 0.1% from a year earlier, following a 0.5% gain the previous month and up for the second straight month, according to a Reuters poll.

A slowdown will have far reaching implications as household spending is a key gauge of private consumption and the overall economy. By some economists’ estimates, the world’s fourth largest economy has contracted for three straight quarters through the January-March period.

Economists see GDP rebounding this quarter, driven by domestic demand led by higher wages and capital expenditure, while elevated interest rates in the United States and Europe as well as a slowdown in China cloud the outlook.

“Considering underlying inflation, consumption has not yet emerged from its soft patch. As prices are not yet coming down, households remain thrifty,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Although wages may be rising sharply, and services consumption may have picked up during the Golden Week holidays in early May, this survey reminds us of weak consumption.”

On a seasonally-adjusted month-on-month basis, all household spending likely rose 0.5% in May, rebounding from a 1.2% decline in April.