–Japan Govt Downgrades View: Pickup in Machine Orders Stalling
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, posted a sharper-than-expected second straight monthly drop in February amid uncertainty over economic growth caused by surging producer costs and the war in Ukraine, data released Wednesday by the Cabinet Office showed.
Orders from both manufacturers and non-manufacturers marked the second consecutive decline, prompting the Cabinet Office to downgrade its assessment.
The average forecast by 36 economists for Japan’s real GDP for the January-March quarter has been revised down to an annualized 0.64% contraction from a 0.24% drop last month in light of sluggish consumer spending during the Omicron storm and despite solid demand for upgrading factories and offices, according to the monthly ESP Forecast Survey conducted by the Japan Center for Economic Research from March 31 to April 7 and released Tuesday.
The key points from machinery orders data:
- Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, plunged 9.8% on the month in February on a seasonally adjusted basis after sliding 2.0% in January and rising 3.1% in December. It was much weaker than the median economist forecast for a 1.5% drop. Core orders slipped to Y811.4 billion, the lowest level in 10 months.
- The decrease was led by lower orders for chemical machines and computers from chemical makers, electronic application equipment (X-ray machines, etc.) and computers from general and production machinery makers as well as orders for computers and transport equipment from information service providers and those for computers and telecommunications equipment from the financial industry.
- Last month, the Cabinet Office projected that core machinery orders would slip 0.5% on quarter in the January-March period, which would be the first drop in four quarters following a 5.1% rise in October-December.
- The Cabinet Office downgrade its assessment, saying, “The pickup in machinery orders is stalling,” compared to its previous statement that machinery orders were “picking up.” The downgrade was made only two months after the last upgrade.
- Core orders still gained 4.3% from a year earlier in February for the 11th straight rise, following increases of 5.1% in both January and December and 11.6% in November. The recent double-digit percentage gains were in payback for 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, slipped 2.8% on the month in February after rising 0.9% in January, falling 2.8% in December and climbing 2.6% in November. This category recorded the first year-on-year drop in 11 months, down 31.0%, in reaction to a 115.9% surge in February 2021. The decrease followed increases of 27.2% in January and 31.9% in December.
Contact this reporter: max@macenews.com
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