Demand for services fell for the second straight month in September as squeezed profits began to affect employment and paychecks, dimming prospects for consumer spending to support the world's second-largest economy, the government said Monday.
The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, slid 0.6 percent from August, the Ministry of Economy, Trade and Industry said. The median estimate of 27 economists surveyed by Bloomberg News was for a 0.5 percent decline.
The economy shrank last quarter, entering the first recession since 2001, a government report showed Monday. An increase in consumer spending failed to make up for cutbacks in business investment as exporters braced for a global downturn.
"Stalled demand for services reflects that households have become increasingly defensive," said Kyohei Morita, chief Japan economist at Barclays Capital. "They're trapped by sluggish wage growth, an increasingly severe employment environment and sharply falling share prices."
USJ Co., operator of the Universal Studios Japan theme park, last month reported a 21 percent decline in profit in the first half, citing fewer visitors and sluggish sales of food and drinks.
Household spending slumped for a seventh month in September as the number of jobs available to each applicant slid to a four-year low. Wages grew just 0.2 percent, revised labor ministry figures showed Monday.
Consumers are thinking twice about buying lattes and going to the movies. Discretionary spending fell 7.5 percent in September from a year earlier, accounting for three quarters of the drop in household purchases.
Starbucks Coffee Japan Ltd., an affiliate of the world's biggest coffee shop chain, last week lowered its full-year profit projection 32 percent because of weak sales.