Japan's July household spending rises less than expected

FILE PHOTO: People wear protective masks in a shopping district amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, December 14 , 2020. REUTERS/Kim Kyung-Hoon/File Photo/File Photo

TOKYO (Reuters) – Japan’s household spending grew less than expected in July as a resurgence of COVID-19 cases hindered consumer activity, throwing broader economic recovery prospects into doubt.

The world’s third-largest economy is struggling to shake off the impact of the coronavirus pandemic, which forced the government to impose new state of emergency restrictions that now cover about 80% of the population.

Household spending rose 0.7% year-on-year in July, after a revised 4.3% fall in June, government data showed on Tuesday. That was weaker than a median market forecast for a 2.9% gain in a Reuters poll.

The modest rise was partly due to a sharp contraction in July last year, when household spending slumped 7.6% year-on-year as consumers delayed spending on things such as travel and overnight stays due to the health crisis.

The month-on-month figures showed a 0.9% contraction in July, the third straight month of decline, the internal affairs ministry data showed, dashing expectations for 1.1% growth.

Separate data on Tuesday showed inflation-adjusted real wages in July rose 0.7% from the same month a year earlier, though the gain was also because of a flattered comparison with last year’s steep pandemic-driven drop.

But the data was unlikely to dispel worries that Japan’s economy is at risk of slowing down in the third quarter, as explosive growth in COVID-19 cases at home and in other parts of Asia weighs on consumer and corporate activity.

Revised gross domestic product (GDP) data on Wednesday is expected here to show the economy grew faster than initially reported in the second quarter, helped by stronger business spending.

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