Retail sales gained at their fastest pace in more than a decade in February as the economic recovery spread to households, the Ministry of Economy, Trade and Industry said Monday.
Sales rose 4.2 percent from a year earlier, METI reported, the biggest monthly jump since 1997. The median estimate of 12 economists surveyed was for a 1.6 percent climb.
An export-fueled recovery and emergency stimulus spending are beginning to create jobs and support wages, improving prospects for companies like Dydo Drinco Inc. and Seven & I Holdings Co.
Shares of retailers advanced after the report, and economists said the unexpected surge shows consumer outlays are not confined to goods supported by government measures.
The report “was much stronger than expectations,” said Hiroshi Shiraishi, an economist at BNP Paribas. “Because of the export rebound, profits are recovering, and that’s helping support wages and jobs. Consumer spending won’t make big drops ahead even when the stimulus starts to fade.”
The last time retail sales surged this much was when they advanced 12.4 percent in March 1997, a month before the consumption tax was raised to 5 percent from 3 percent. Higher demand for energy-efficient vehicles and flat-screen televisions bolstered sales last month, the government said. Clothing sales advanced 8.4 percent.
From a month earlier, retail sales unexpectedly climbed 0.9 percent, the second consecutive gain. None of the eight economists surveyed predicted an increase, and their median estimate was for a 1.2 percent drop.
Consumer confidence advanced for a second month in February, led by sentiment about employment, a sign households may boost outlays in the coming months as fears of layoffs recede. Higher sentiment may help offset the unwinding of emergency government spending programs that gave consumers incentives to buy durable goods.
“Even though the boost will fade, you’re still going to get a lasting positive impact” from the stimulus, Julian Jessop, chief international economist at Capital Economics Ltd. in London, said before the report.
The economy added the most jobs in more than three decades in January and pay declined at the slowest pace in 19 months. Prime Minister Yukio Hatoyama won approval for his record ¥92.3 trillion budget last week, securing funding to implement cornerstone election pledges to give households child-care handouts and provide free tuition at high schools ahead of the Upper House election in July.
Not all analysts are convinced the consumer outlays can be sustained. Households continue to demand lower prices for products, threatening to erode retailers’ profit margins.
“Consumer spending can’t increase regardless of jobs and incomes, which appear to have stopped declining but have failed to gained momentum,” said Hiroshi Watanabe, an economist at Daiwa Institute of Research. “The economy will only improve at a very moderate pace.”
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