–Govt Keeps View After Recent Downgrade: Machine Orders Pausing
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, posted a modest rebound in December in reaction to a plunge in November as capex plans for digitization and green transformation remain solid for fiscal 2022 ending in March, data released Thursday by the Cabinet Office showed.
In the October-December quarter, the core measure of machinery orders recorded a second consecutively quarterly drop, but the Cabinet Office expects a little over half of the decline in the second half of 2022 will be recovered in the first three months of 2023.
In the fourth-quarter GDP data released Tuesday that showed a slight rebound, business investment in equipment marked its first drop in three quarters, down 0.5% on quarter, following solid gains of 1.5% in July-September and 2.1% in April-June. Capex trimmed the GDP by 0.1 percentage point in the fourth quarter after providing a positive 0.3-point contribution in each of the previous two quarters.
The key points from machinery orders data:
* Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, rose 1.6% from the previous month on a seasonally adjusted basis to ¥851.9 billion in December after slumping 8.3% in November. It was weaker than the median economist forecast of a 2.8% rise (forecasts ranged from 1.4% to 6.8% gains). The 5.3% rise to ¥966.0 billion in July 2022 was the largest amount since ¥973.5 billion in June 2019.
* Core orders fell 5.0% on quarter in the final quarter of 2022, coming in much weaker than the official forecast for a 3.6% rebound. It followed a 1.6% drop in July-September and an 8.1% rise in April-June. The Cabinet Office projected that core orders would rise 4.3% in the January-March quarter, led by a sharp rebound in orders from the manufacturing sector.
* Orders from manufacturers fell 2.1% on the month in December for the first rise in four months after falling 9.3% in November while those from non-manufacturers in the core measure marked the second straight drop, down 2.5%, after a 3.0% dip.
* The Cabinet Office maintained its assessment after downgrading it last month for November data, saying, “Machinery orders are pausing.” The three-month moving average fell 0.6% in the October-December period after falling 2.6% in September-November.
* Core orders dipped 6.6% from a year earlier in December after falling 3.7% in November, which was the first drop in 20 months, and rising 0.4% in October. It was weaker than the median economist forecast of a 5.9% drop (forecasts ranged from 7.3% to 2.1% decreases).