–Machine Orders Seen +4.6% in Q2 Vs. +2.6% in Q1, Led by Strong Demand from Non-Manufacturers
–Cabinet Office Keeps View: Machine Orders Pausing
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, came in much weaker than expected in March, posting drops on the month and year, but managed to record a modest rise in the first quarter and are set to maintain a quarterly gain in April-June, reflecting solid investment plans for fiscal 2023, data released Monday by the Cabinet Office showed.
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 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.
The key points from machinery orders data:
* Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, unexpectedly fell 3.9% from the previous month on a seasonally adjusted basis to ¥852.9 billion in March for the second straight drop after slipping 4.5% to ¥888.0 billion in February and surging 9.5% to ¥929.6 billion in January. It was much weaker than the median economist forecast of a 1.0% rise (forecasts ranged from a 3.0% fall to a 4.8% gain). The amount in January was the largest since ¥948.8 billion in July 2022.
* Core orders rebounded 2.6% on quarter in the January-March quarter,
coming in slightly below the official forecast for a 2.9% increase. It followed decreases of 4.7% in October-December and 1.6% in July-September and a 6.7% rise in April-June.
* The Cabinet Office projected that core orders would rise a further 4.6% in the April-June quarter, led by a sharp rise in orders from the non-manufacturing sector, as consumer spending on services is expected to remain solid without strict Covid public health rules.
* Orders from manufacturers dipped 2.4% on the month in March after rising 10.2% in February and falling 2.6% in January while those from non-manufacturers in the core measure fell 4.5% after slumping 14.7% in February and rebounding 19.5% in January.
* The Cabinet Office maintained its assessment after downgrading it in January for November data, saying, “Machinery orders are pausing.” The three-month moving average edged up 0.2% in the January-March period after rising 1.6% in December-February after 0.9% in November-January.
* Core orders unexpectedly fell 3.5% from a year earlier in March for the first drop in three months after surging 9.8% in February, rising 4.5% in January and falling 6.6% in December. It was much weaker than the median economist forecast of a 1.4% gain (forecasts ranged from a 2.0% drop to a 6.0% rise).