Japan December, Q4 Machine Orders Continue Rising; Slight Setback Seen in Q1

–Japan Government Upgrades View for 2nd Month: Machine Orders Picking Up

By Max Sato

(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, unexpectedly posted a third straight monthly gain in December, boding well for capital investment, which marked a modest rebound in October-December to support Q4 GDP growth, data released Thursday by the Cabinet Office showed.

This prompted the Cabinet Office to upgrade its assessment for the second month in a row, saying, “Machinery orders are picking up,” instead of “showing signs of a pickup.”

The key points from machinery orders data:

* Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, rose 3.6% on the month in December on a seasonally adjusted basis after a 3.4% rise in November, coming in much stronger than the median economist forecast for a 1.8% drop in a range of a 4.0% fall to a 2.3% rise. Some economists had projected core orders would continue rising in December, based on solid demand for capex seen in recent surveys.

* Orders from manufacturers were up for the second straight month while those from non-manufacturers recorded the second consecutive drop.

* The increase was led by orders for computers from electric and business machine makers as well as those for wind and hydro power generating equipment from general and business machine manufacturers. From the non-manufacturing sector, higher orders were seen for trains from transport firms, construction equipment from contractors and computers from information service providers.

* In the October-December quarter, core orders were up 6.5% from the previous quarter, when they rose 0.7%, beating the official forecast of a 3.1% increase. The Cabinet Office projected that core machinery orders will slip 1.1% on quarter in the January-March period, which would the first drop in four quarters.

* Core orders gained 5.1% from a year earlier in December, the ninth straight year-on-year rise, with the pace of increase decelerating from 11.6% in December. The recent double-digit percentage gains were in reaction to a 19.1% slump in the April-June quarter of 2020 and a 14.1% drop in July-September that year, when the initial stage of the pandemic dampened global demand.

* Orders from overseas, which are not part of the core measure, fell 3.5% on the month in December after rising 0.7% in November, posting the first drop in three months. From a year earlier, this category recorded the ninth straight year-on-year rise, but the pace of increase slowed to 31.9% from 44.1% the previous month.