Japan’s retail sales grew the fastest in 10 months in October as consumers shelled out more on fuel, cars, medicines and cosmetics, in a sign the world’s third-largest economy is likely returning to growth after a summer stumble.
Japanese policymakers are counting on stronger private consumption to help accelerate inflation to the central bank’s 2 percent target, which has remained elusive despite more than five years of massive monetary stimulus.
The 3.5 percent annual gain in retail sales in October from a year earlier handily beat the median estimate for a 2.6 percent increase and follows a revised 2.2 percent rise in September.
It was the fastest annual gain since last December.
Retail sales are a key barometer for the strength of private consumption, which accounts for roughly 60 percent of the Japanese economy. The data confirmed they have risen for a full straight year, reflecting a tight labour market and gradual wage growth.
On a seasonally-adjusted basis, retail sales grew 1.2 percent in October versus a revised 0.1 percent gain in the previous month, data from the Ministry of Economy, Trade and Industry showed on Thursday.
It marked a fifth straight month of monthly gains, and was the biggest increase since June.
“The recent weakness probably reflected a couple of natural disasters which may have discouraged consumers from visiting shops,” Marcel Thieliant, senior Japan economist at Capital Economics, wrote in a note to clients.
“If retail sales volumes remain unchanged in November and December, they would rise by 1.0 percent across the quarter. The upshot is that private consumption may rebound by around 0.5 percent in the fourth quarter.”
Japan’s economy shrank more than expected in the third quarter, hit by natural disasters and sluggish exports.
But a flurry of data due this week, including factory output and jobless figures, is expected to reinforce consensus views that the contraction was temporary.
The economy is widely expected to return to growth in the current quarter, though the strength of that rebound is still up for debate. Slowing global demand and the intensifying U.S.-China trade war are clouding the outlook for export-reliant Japan.
Japanese manufacturing activity expanded at the slowest pace in two years in November and new orders contracted for the first time since September 2016, a preliminary survey showed on Monday.