TOKYO (Reuters) – Japan’s July household spending probably expanded for an eighth straight month but at less than half the pace of the previous month, a Reuters poll showed on Friday, in a worrying sign for policymakers ahead of a planned sales tax hike.
Household spending in July was expected to have risen 1.1% from a year earlier, the poll of 16 economists showed, down from growth of 2.7% in June and 4.0% in May.
“Spending on seasonal items such as summer clothes and outings didn’t perform well due to the prolonged rainy season and lower temperature,” said Koya Miyamae, senior economist at SMBC Nikko Securities.
“We expect there will be a rush to purchase goods ahead of the sales tax hike during the July-September quarter, but such spending will likely be weak in July.”
Japan is scheduled to increase the sales tax to 10% in October from the current 8%. Some policymakers are concerned the higher levy could dent consumer spending.
The government will publish household spending data at 8:30 a.m. Japan time on Sept. 6 (2330 GMT, Sept. 5).
The economy grew a much faster-than-expected annualized 1.8% in April-June, marking the third straight quarter of expansion, as robust household consumption and business investment offset the hit to exports from cooling global demand.
Strong domestic demand is needed to support the economy which is at risk of tipping into a recession due to the global slowdown and protracted Sino-U.S. trade war.
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