By Jason Clenfield
March 29 (Bloomberg) -- Sales at Japan's biggest retailers rose for the first time in five months, signaling the country's economic expansion may be spreading to consumers.
Sales at large stores open for at least 12 months climbed 0.5 percent from a year earlier, the trade ministry said today in Tokyo. Including new stores, receipts rose 1.6 percent, the most in more than a year. Shoppers flocked to Daimaru Inc. and Isetan Co. stores as warm weather spurred demand for spring clothes.
Consumer spending accounts for more than half of Japan's economy and a rebound may help sustain growth in the face of likely slowdowns in exports and business investment. Economists predict reports tomorrow will show unemployment matched an eight- year low and household spending rose for a second month, following more than a year of declines.
``Large retailers are losing market share, so the fact that the number comes in strong says something positive about spending,'' said Hiroshi Shiraishi, an economist at Lehman Brothers Japan Inc. ``The contribution of exports will fade and household spending will pick up a bit.''
The yen traded at 117.20 per dollar at 1:13 p.m. in Tokyo from 116.93 before the report.
Overall retail sales dropped 0.2 percent from a year earlier as warm weather cut demand for heating oil, the trade ministry said. February's temperatures were between 2 and 3 degrees Celsius higher than average and some areas had the most sunshine in 50 years, according to the weather bureau.
Willing to Spend
``Weather effects tend to come out in the wash over the course of a few months,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``People are willing and able to spend.''
Department store sales, which account for 8 percent of the retail total, rose at the fastest pace in 11 months in February, as warmer weather sparked interest in spring clothing, the Japan Department Stores Association said last week.
Daimaru and Isetan, Japan's third- and fourth-largest department stores, reported higher sales in the month, buoyed by brisk demand for dresses and light jackets.
Retail sales were ``basically flat,'' though there are signs of improvement, said Takahide Arai, a trade ministry spokesman. He cited last month's report in which four of the seven categories tracked by the ministry showed declines, while this month only two did: autos and weather-affected fuel sales.
Sales of automobiles fell 5.2 percent, the 11th month of declines. Japan's aging consumers are choosing not to replace their vehicles as manufacturers including Nissan Motor Co. release fewer new models.
Services, Internet
Today's report probably understates consumption because it excludes spending on services and the Internet. The government's index of demand for services climbed to a record in February.
Japan Travel Bureau estimated spending on vacations increased 2 percent in 2006. Combined sales at the vendors listed on Rakuten Inc., Japan's largest Internet shopping site, surged 37 percent for the year.
Spending on services made up 57 percent of private consumption in 2006, compared with about 50 percent a decade ago, according to the Cabinet Office. As Japan's consumers get older, spending will probably shift from retailing toward travel and leisure, economists say.
Household spending probably grew 0.6 percent in February after rising for the first time in 13 months in January, economists estimate. The unemployment rate probably stayed at 4 percent for a fourth month. The government releases both reports tomorrow at 8:30 a.m. in Tokyo.
A Cabinet Office survey of merchants who deal directly with the public showed sentiment improved in the month for the first time since September.
From a month earlier, retail sales fell a seasonally adjusted 0.9 percent after jumping 2.2 percent in January, the trade ministry said.
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
Last Updated: March 29, 2007 00:15 EDT
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