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Japanese retail sales jumped for the seventh straight month and at a faster than expected pace in July, led by higher demand for motor vehicles and fuel, official figures showed on Tuesday. A separate report also showed that industrial production rose unexpectedly for the first time in two months.
The Ministry of Economy, Trade & Industry said retail sales rose 3.9% from a year earlier to JPY 11.7 trillion, accelerating from the 3.3% increase in June. Analysts had predicted a 3.5% rise.
Motor vehicle sales increased 8.3% in July, while fuel sales were up 8.2%. Positive contributions also came from machinery & equipment, fabrics, apparel & accessories, and food & beverages. On the other hand, a yearly decline was seen in sales of general merchandise.
On a month-over-month basis, retail sales were up 0.7% in July. Economists had forecast a 2.4% increase.
Meanwhile, sales among large retailers were down a same-store adjusted 1.2%, smaller than the 1.3% drop forecast by economists and after the 3.1% contraction in the previous month. On an unadjusted basis, sales in large-scale retail stores were down 0.9%.
Wholesale trade sales were down 0.1% compared to the previous year in July. Total commercial sales rose 1%, slower than the 1.3% increase in the preceding month.
The latest retail figures will come as little cheer to Japanese policymakers who have been fighting to get the economy out of a deflationary spiral. On Monday, the Bank of Japan increased the amount of low-interest loans available to the money market by JPY 10 trillion in a bid to prevent a deepening of the country's deflationary woes, while the government announced a new JPY 920 billion stimulus package to kick start the economy.
Japanese consumer prices fell 1.1% in July, the 17th straight month of decline. Slumping prices discourages people from spending in the long-term and it discourages people from investing as well.
Separately, the ministry said industrial production climbed 0.3% in July, belying expectations for a 0.2% fall. Factory output had dropped 1.1% in June.
Industries that mainly contributed to the increase included general machinery, chemicals and pulp, paper & paper products. Production of reaction vessels, flat-panel displays and semiconductors drove the rise in output.
Meanwhile, shipments were down 0.1% during July, while inventory dropped 0.5%. The inventory ratio increased 1.5%.
On a year-over-year basis, production and shipments both rose 14.8%. Inventory was up 1.3%.
The rise in factory output suggests the yen's rise to a 15-year high against the U.S. dollar is yet to severely hit companies. However, many observers expect output to decline in the coming months as demand wanes in the U.S. and the emerging markets.
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