–Orders Reflect Easing Impact of Suspended Vehicle Output Amid Safety Test Scandal
–Core Orders Mark 12th Straight Y/Y Drop but Better Than Expected; BOJ Survey Shows Solid Capex Plans
–Cabinet Office: Machine Orders Weakening
By Max Sato
(MaceNews) – Japanese core machinery orders, the key leading indicator of business investment in equipment, jumped 7.7% on the month in February to a 13-month high of ¥886.8 billion on continued solid demand for computers, recovering from January’s 1.7% slump, which was partly caused by suspended vehicle output over a safety test scandal, data released Monday by the Cabinet Office showed.
The latest figure was much stronger than the median economist forecast of a 0.7% rise and also the highest growth since 8.1% seen in January 2023. Orders from manufacturers rose 9.4% on the month after a 13.2% plunge in January and a 6.0% rise in December while those from non-manufacturers posted a second straight increase, up 9.1%, after a 6.5% rise and a 2.3% dip.
Core machinery orders, which track the private sector and exclude volatile orders from electric utilities and for ships, marked their 12th straight decline from a year earlier, down 1.8% (consensus was a deeper 5.8% drop), following a 10.9% slump in the prior month.
The Cabinet Office maintained its assessment after downgrading it for the first time in more than a year last month, saying, “Machinery orders have weakened recently.” Previously, orders had been “stalling.”
“We are not sure whether the sharp gain in February was a blip so it is better to wait and see before considering an upgrade to our assessment,” a Cabinet Office official told Mace News.
The Bank of Japan’s March quarter Tankan survey showed solid capex plans for fiscal 2024 that began on April 1, backed by strong demand for automation amid labor shortages as well as government-led digitization and emission control.
Other details from machinery orders data:
* Core machinery orders surged 7.7% from the previous month on a seasonally adjusted basis to a 13-month high of ¥886.8 billion in February after falling 1.7% to ¥823.8 billion in January and rising 1.9% to ¥837.8 billion in December. It was the largest amount since ¥920.1 billion in January 2023. November’s ¥821.9 billion was the lowest since ¥795.8 billion in April 2021. The latest figure was stronger than the median economist forecast of a 0.7% rise (forecasts ranged from a 1.5% drop to a 3.0% gain).
* The increase in core orders was led by higher demand for computers from electric machine makers, cranes and conveyors and computers from information and communications equipment makers as well as for communications equipment from telecom firms and for excavators, cranes and tractors from construction firm.
* The forecast for the January-March quarter is based on the Cabinet Office survey concluded by Dec. 25, which means the effects of the powerful New Year’s Day earthquake and suspension of all domestic production by Toyota Motor group firm Daihatsu over a vehicle safety scandal from late December until mid-February are not reflected in the outlook provided by firms.