–Cabinet Office Keeps View: Machine Orders Pausing
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, posted the first drop in three months in reaction to a surge in January as some firms have turned cautious amid slowing global demand, data released Wednesday by the Cabinet Office showed.
But the decline in core private-sector orders was much smaller than expected and they jumped from a year earlier for a second consecutive rise. Capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control.
The Bank of Japan’s quarterly Tankan business survey for March released last week showed large firms have solid plans for investment in equipment for fiscal 2023 starting on April 1 while smaller firms projected a rise at the initial stage, which is unusually bullish. Some plans may be carried over from fiscal 2022.
Japanese policymakers have said the economy needs continued monetary easing and fiscal spending to support a full recovery from the pandemic-caused slump and guide inflation to stable 2% with sustainable wage growth.
The key points from machinery orders data:
- Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, slipped 4.5% from the previous month on a seasonally adjusted basis to ¥888.0 billion in February after surging 9.5% to ¥929.6 billion in January. It was firmer than the median economist forecast of an 8.6% decline (forecasts ranged from 11.6% to 5.0% drops). The amount in January was the largest since ¥948.8 billion in July 2022.
- The Cabinet Office last month projected that core orders would rise 2.9% on quarter in the January-March quarter after slumping 4.7% in October-December, led by a sharp rebound in orders from the manufacturing sector. Even if core orders fell 3.1% on the month in March, they would achieve the projected 2.9% rise in the first quarter.
- Orders from manufacturers rose 10.2% on the month in February after falling 2.6% in January and rising 2.5% in December while those from non-manufacturers in the core measure dipped 14.7% after rebounding 19.5% in January and slipping 3.2% in December.
- The decrease in core orders in February was led by lower demand for “other heavy machines” (motors, transformers, etc.) from steel mills and electric machine makers as well as a pullback in orders for computers from construction firms, the financial sector and transport companies. Orders for computers from telecommunications firms and wholesalers and retailers rose on the month.
- The Cabinet Office maintained its assessment after downgrading it in January for November data, saying, “Machinery orders are pausing.” The three-month moving average rose 1.6% in the December-February period after rising 0.9% in November-January.
- Core orders surged 9.8% from a year earlier in February for a second straight increase after rising 4.5% in January. It was much stronger than the median economist forecast of a 3.0% rise (forecasts ranged from a 0.6% drop to a 6.8% gain).
Contact this reporter: max@macenews.com
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