2017.10.3010:31:00UTC+00Weakness In Japan's Household Spending Unlikely To Last: Capital Economics

The weakness in Japan's consumer spending is unlikely to last as household incomes are growing at a healthy pace and consumers remain unusually upbeat, Marcel Thieliant, an economist at Capital Economics, said.

Retail sales rose 0.8 percent month-over-month in September, reversing a 1.6 percent drop in August, official data showed on October 30.

Despite this rebound in September, private consumption probably fell in the third quarter for the first time in almost two years, the economist noted.

Sales of motor vehicles dropped 1.4 percent and those of household appliances slid by 3.3 percent. Meanwhile, most other spending categories recorded an increase.

The Cabinet Office's monthly estimate of private consumption rebounded in August following three consecutive monthly falls.

The agency is set to release September figures on October 31.

"The key point though is that even if private consumption rebounded by 1 percent monthly in September, it would still have declined by 0.2 percent q/q last quarter," the economist pointed out.

Capital Economics expects a 0.3 percent q/q fall in private consumption in the third quarter which would be the first drop since the final three months of 2015.

"However, we don't think this is necessarily cause for concern," the economist said.

While wage growth remains sluggish, household incomes are being bolstered by strong job gains.

Besides this, subdued inflation means that real incomes are also growing at a healthy pace.

"The upshot is that we expect consumer spending to grow by just over 1 percent both this year and next," the economist added.