Report
June Spending, Income Drops Again, Worse than 1997
posted by Richard Katz on July 30, 2014
Found in Japan, categorized in Growth Outlook and Business Cycle
Report Cover
Headline
The real question now is whether July-September will show a nice rebound, or will continue to be anemic
Abstract
Income and spending down again in June, with total nominal household spending down 2.9% from last year
For April-June, spending is down 5% from 2013, twice as bad as the 2.6% drop in April-June 1997 following that year’s tax hike
The real question now is whether July-September will show a nice rebound, or will continue to be anemic
We don’t know of any major economists who thinks that spending will keep dropping for two years, as after the 1997 hike
Nonetheless, even if income and spending is merely anemic rather than plunging, it will further hurt Shinzo Abe’s approval ratings and put in jeopardy the scheduled October 2015 rise in the consumption tax by another 2 percentage points
Spending is down because income is down; among households headed by a worker, nominal income in April-June was down 2%; real (price-adjusted) income was down a whopping 6%
The Abe team and many economists had expected wage hikes because they claim that the labor market is tight
In reality, all of the increase in jobs in the past five years, including during Abe’s tenure, have gone to women who are paid less; also, all the job increase has gone to irregular workers (part-timers and temporaries) who are also paid less