Japans consumer confidence may get worse before it gets better : Capital Economics The drop in consumer confidence in February shows that consumers are increasingly doubtful about the benefits of Abenomics. Consumer confidence fell from 40.5 to 38.3, and is now even weaker than when PM Abe took over in December 2012. Among the four components, consumers willingness to buy plunged from an already weak 36.4 to 32.4, the lowest level since 2009. Admittedly, the recent sharp deterioration can be explained by the upcoming consumption tax hike, and may well prove fleeting. The effect of lower spending should also be mitigated by strong job growth. While the employment component fell from 49.3 to 46.9, it remains quite strong by past standards. However, households remain concerned about weak income prospects. The index for income growth dipped from 38.6 to 38.2, a three-year low. Whats more, households assessment of their overall livelihood is closely linked to their expectations about wage growth. This index declined from 37.5 to 35.6, a level last seen following the Great East Japan Earthquake in 2011. Any recovery in consumer confidence in coming months will be strongly dependent on an acceleration in wage growth. But with prices rising in the wake of the consumption tax hike, confidence may well get worse before it gets better.
Posted on: Wed, 12 Mar 2014 05:28:59 +0000
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