Retail sales rise in Japan
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Rising retail sales suggest this badly-hit sector is finally recovering.
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TOKYO, Japan (Reuters) -- Japanese retail sales rose in January for the first time in three months and small businesses were more optimistic in February, suggesting a recovery may be spreading to the weakest parts of Japan's economy.
Retail sales rose 1.3 percent from January 2003 and 3.5 percent seasonally adjusted from December, helped by strong demand for cars and a rebound in clothing sales, the Ministry of the Economy, Trade and Industry (METI) said on Thursday.
A separate monthly survey of 800 small companies, the backbone of Japan's industry, by Shoko Chukin Bank showed firms at their most optimistic about business conditions in three months.
"It's encouraging to see these firm figures. Consumption is perhaps recovering, finally," said Yoshimasa Maruyama, an economist at Mizuho Research Institute.
Personal consumption, which makes up over half of Japan's economy, has been stubbornly weak as other sectors have picked up with the help of robust exports.
A Reuters poll of 14 economists came up with a median forecast of a 0.9 percent year-on-year fall in retail sales.
However, Maruyama remained wary.
"Personal spending is still the weakest segment of the economy. We will have to watch data for another few months."
Gross domestic product data last week showed Japan's economy grew 1.7 percent in October-December from the previous quarter -- the strongest pace since 1990.
Although strong growth has encouraged more capital spending and bolstered corporate profits, most companies have been wary of hiring more workers or raising pay.
Most are still in the process of cutting costs, meaning many households have yet to benefit from better business conditions.
Another sector which has lagged behind the recovery has been small firms, few of which export goods directly. Cost-cutting at larger firms has also put pressure on them to cut prices, crimping profits.
But Shoko Chukin said its diffusion index of small company sentiment rose to 49.3 in February, the first rise in three months, with both manufacturers and non-manufacturers reporting an improvement.
Cars and clothes
The retail sales data showed cars and clothes led the overall increase. Auto sales rose 7.0 percent in January compared with the same month a year ago, while clothing sales were up 2.5 percent, reversing December's 3.4 percent decline.
Economists attributed the rise in car sales to the popularity of new models such as Honda's Odyssey.
Some also said the recovery in the clothing sector was probably a reaction to poor sales in previous months, which had been blamed on unseasonably warm weather.
But Ryo Hino, an economist at JP Morgan, said it was more than a technical or temporary rebound.
"The broadly based pick-up in other items suggests there was also some genuine improvement," he said. "Obviously, this bodes well for consumer demand in the first quarter."
Wholesale sales were up 2.3 percent, helped by strong demand for chemicals, machinery and food and drink, METI said.
Sales at large stores, excluding newly opened ones, continued to decline, falling 2.1 percent in January, while department store sales fell 0.3 percent, again excluding new openings.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
