— Govt Downgrades View: Pickup in Machinery Orders Is Marking Time
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, surprisingly slumped in February, confirming some sectors are still cautious about replacing or upgrading capacity, data released Wednesday by the Cabinet Office showed.
Earlier this month, the Bank of Japan’s quarterly Tankan survey for March showed that major firms planned to increase capex by a combined 3.0% in fiscal 2021. Those firms planned a decrease of 3.8% for fiscal 2020 that ended March 31, which was revised down from a 1.2% drop projected three months earlier.
Smaller businesses expected their capex plans for fiscal 2021 to fall a combined 5.5%, firmer than their latest plan of a 11.1% decrease for fiscal 2020, the Tankan showed. In December, those firms planned a 13.9% decrease for fiscal 2020. Small businesses tend to revise up their plans later in the fiscal year.
The key points from machinery orders data:
* Core privates-sector machinery orders, which exclude volatile orders for power generation equipment and ships, fell a seasonally adjusted 8.5% on month in February, coming in much weaker than the median economist forecast for a 2.8% rise. It was the second consecutive monthly decline. In January, the core measure fell 4.5%, which was the first drop in four months.
* Note this piece of data tends to fluctuate widely from month to month.
* Core orders slid 7.1% from a year earlier in February, marking the first y/y drop in three months following a 1.5% gain in January.
* The Cabinet Office revised down its assessment from the previous month, saying, “The pickup in machinery orders is marking time.” Previously, it had said, “Machinery orders are picking up.”
* Orders from the manufacturing sector fell 5.5% on month in February, the second straight fall after -4.2% in January, while orders from the
non-manufacturing sector excluding those for power generation and ships plunged 10.9%, also the second consecutive drop after -8.9% the previous month.
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Contact this reporter: max@macenews.com.
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