Japan's Household Spending Slips For Third Straight Month

Japan's household spending posted a surprise drop in May, falling for the third consecutive month in a worrying sign for the long-term outlook of the world's third-largest economy.

Spending slipped 0.5% in May from a year earlier, government data showed on Friday, dragged down by lower expenditure on vegetables as well as cars, where supplies have been hit by chip shortages and supply chain disruption.

The data, which was much weaker than the median estimate for a 2.1% increase in a Reuters poll, showed people dialled back on spending on vegetables to eat at home, while loosening their purse-strings on services such as eating out.

Spending also dropped from the previous month, falling 1.9%, weaker than a forecast 0.8% rise.

Policymakers have been worried about growing pressure on households which are facing surging prices of food and other daily essentials as well as higher costs of utilities such as electricity.

Elderly people such as 76-year-old Mieko Inoue, a pensioner who lives by herself in Tokyo, pointed to Russia's military campaign in Ukraine as leading to the higher cost of goods in Japan, saying the government is not to blame.

"I was already refraining from buying clothes," Inoue told Reuters on Wednesday, adding she remained hesitant to eat out with friends out of fear of COVID-19.

Her case shows it may take time for consumer activity and spending in Japan to fully recover to their levels seen before the coronavirus pandemic.

Japan's economy is projected to rebound on stronger consumption in the second quarter following contraction in January-March.

But risks such as the hit manufacturers are taking from China's COVID-19 curbs and pressure from high raw material and energy prices are clouding the economic outlook.