Consumer prices climb in Japan, retail sales fall

TOKYO (AP) — Japan's economic recovery gained momentum in July, as manufacturing accelerated and consumer prices rose for a second straight month, despite weaker household spending and retail sales.

The data released Friday showed the consumer price index rose 0.7 percent in July from a year earlier, for the second straight month of gains. That suggests efforts to break free of years of demand-dampening deflation are progressing. The CPI rose 0.2 percent in June.

However, the core index, which excludes food and energy prices, fell 0.1 percent.

The Ministry of Economy, Trade and Industry said industrial output rose 1.6 percent from a year earlier but 3.2 percent from the month before, suggesting the recovery is taking hold. It forecasts further expansion in August and September.

The government's strategy is aimed at generating inflation that it says will help perk up demand and, in response, investment and employment, ending years of stagnation. However, economists say that without matching increases in wages, rising prices and planned tax hikes could actually weaken consumer demand, undermining any economic rebound.

Average household spending fell 1.4 percent in July from a year earlier, despite slight improvements in income and the jobless rate, which fell to 3.8 percent from 3.9 percent the month before.

Retail sales fell 0.3 percent in July from a year earlier for the first decline in three months. Sales of clothing and other items sagged, while food sales rose.