Japanese household spending leaps in March as restrictions lift

10 May 2022

Chris Scicluna
, 
Emily Nicol

European and Asian equities regain poise after marked Wall St. weakness
After another turbulent day on Wall Street yesterday – the S&P500 closed down 3.2%, the NASDAQ down 4.3% – perhaps inevitably Asian equities opened sharply lower today. However, losses were steadily pared back as the day went on. So, for example, Japan’s Topix ended the day down just 0.9% having been down twice as much earlier in the day, while the Hang Seng is currently down about 1.9% having initially been down roughly 1ppt more after reopening from its one-day holiday. And China’s CSI 300 more than fully reversed the early losses to close up a little more than 1%. European markets have largely opened about 1.0% higher and US stock futures are now up 1-1½% too.

Bond yields more stable after yesterday’s wild swings in USTs
Having initially sold off to push 10Y yields up to 3.20%, USTs subsequently rallied yesterday as stocks fell. So, the 10Y yield ended the day below 3.05% and moved sub-3% in early Asian trading. But with sentiment more stable, USTs have subsequently weakened a bit, with yields a couple of bps higher across the curve from yesterday’s close (10Y yields back close to 3.05%). In Europe, Bunds have opened only about 1bp firmer across the curve (10Y yields currently near 1.08%, some 10bps lower than yesterday’s peak) with BTPs outperforming. In the Asia-Pacific, ACGBs reversed initial big gains while 10Y JGBs were again broadly steady just below the YCC ceiling.

Japanese household spending leaps in March as restrictions lift, but down sharply in Q1
Benefiting from the lifting of pandemic restrictions in the second half of March, today’s Japanese household spending numbers reported a marked increase in consumption that month, of 4.1%M/M in real terms, the most since September. The improvement was broad based, with double-digit monthly increases in transport and clothing. When adjusting for the more volatile items, core spending was up for the second successive month and by 3.0%M/M. However, given the weakness earlier in the quarter at the height of the latest pandemic wave, household spending was still down almost 2%Q/Q in Q1, suggesting a drag on Q1 GDP growth, and still almost 8% lower than the pre-consumption tax hike peak in September 2019.

UK retail survey suggested steepest drop in like-for-like sales since March 2020
Today’s BRC retail survey painted a gloomy picture for the sector at the start of Q2, as the significant rise in the cost of living weighed on spending. According to this survey, the value of retail sales fell (-0.3%Y/Y) for the first time since the start of 2021, with the steepest drop in like-for-like sales (-1.7%Y/Y) since March 2020 and spending on big-ticket items hit hardest. Given the recent surge in prices, the decline in volume terms was even larger. Admittedly, part of the weakness reflects increased opportunities to spending on services. Certainly, today’s Barclaycard consumer spending report suggested that spending on international travel had the best month since before the pandemic. But this report also suggested softer growth in spending in a number of other categories, including subscriptions, takeaways and fuel.

German ZEW to flag big investor concerns about the outlook
Like yesterday’s euro area Sentix indices – which showed the survey balance for investor expectations for the six months ahead in Germany declining to an all-time low – today’s German ZEW investor survey for May is highly likely to have remained extremely downbeat. The current conditions balance is forecast to have fallen to its weakest since April 2021, with the expectations index likely at its lowest since March 2020 at the onset of the pandemic. This morning will also bring Italian IP numbers for March which are likely to report a drop in output of more than 1%M/M at the end of the quarter to be down over Q1 as a whole.

US NFIB small business optimism set to fall to its lowest level for two years
A relatively quiet day for US releases brings the NFIB small business optimism index for April. Having fallen sharply since the start of the year, the headline indicator is forecast to have slipped further at the start of the second quarter, to its lowest reading for two years.

ECB and Fed policy makers in action
This afternoon will see a number of policy makers in action, including Bundesbank President Nagel at an event titled “From global pandemic to geopolitical conflict”. New York Fed president Williams will also speak at the same event, with the Fed’s Waller, Kashkari and Mester all in action too.

Categories : 

Back to research list

Disclaimer

This research report is produced by Daiwa Securities Co. Ltd., and/or its affiliates and is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority and is a member of the London Stock Exchange and Eurex Exchange. Daiwa Capital Markets Europe Limited and its affiliates may, from time to time, to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities referred to herein (the “Securities”), perform services for or solicit business from such issuers, and/or have a position or effect transactions in the Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. In addition, employees of Daiwa Capital Markets Europe Limited and its affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers. Daiwa Capital Markets Europe Limited may, to the extent permitted by applicable UK law and other applicable law or regulation, effect transactions in the Securities before this material is published to recipients.

This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.


Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at  /about-us/corporate-governance-regulatory. Regulatory disclosures of investment banking relationships are available at https://daiwa3.bluematrix.com/sellside/Disclosures.action.