–After Annual Revision, Cabinet Office Sees Core Orders Up 2.9% Q/Q in Q1, Revised Down from +4.3%
–Cabinet Office Maintains View: Machinery Orders Pausing
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, jumped for a second straight monthly advance in January, after a modest gain and a plunge in November, amid a widespread digitization drive and prospects for further reopening of the economy without strict anti-Covid public health rules, data released Thursday by the Cabinet Office showed.
In the fourth-quarter GDP that showed no growth in revised data, business investment in equipment marked its first drop in three quarters, down 0.5% on quarter, following a solid 1.5% gain in July-September. Capex trimmed the GDP by 0.1 percentage point in October-December after providing a positive 0.3-point contribution in the previous quarter.
Despite the recent pullback, business investment is generally supported by demand for automation, government-led digital transformation and emission control.
The key points from machinery orders data:
* Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, surged 9.5% from the previous month on a seasonally adjusted basis to ¥929.6 billion in January after rising 0.3% (revised down from a 1.6% gain) to ¥848.9 billion (revised from ¥851.9 billion) in December and slumping 6.7% (revised up from an 8.3% fall) in November. It was stronger than the median economist forecast of a 1.5% rise (forecasts ranged from a 0.5% drop to a 3.0% gain). The amount in January was the largest since a downwardly revised ¥948.8 billion in July 2022.
* The Cabinet Office conducted an annual update on seasonal adjustments, resulting in some sharp revisions to past figures.
* Machinery orders made a solid start to the first quarter of 2023. After the annual revision, the Cabinet Office now projects that core orders will rise 2.9% on quarter (revised down from last month’s forecast of a 4.3% increase) in the January-March quarter, led by a sharp rebound in orders from the manufacturing sector, after slumping 4.7% (revised up from a 5.0% drop) in October-December.
* Core orders would rise 2.9% even if they fell 4.0% on the month in each of February and March. If core orders were unchanged for the rest of the quarter, they would rise 7.1% in January-March.
* Orders from manufacturers fell 2.6% on the month in January for the first rise in two months after rising 2.5% (revised up from a 2.1% fall) in December while those from non-manufacturers in the core measure marked the first rise in third months, up 19.5%, after falling 3.2% (revised down from a 2.5% dip).
* The Cabinet Office maintained its assessment after downgrading it in January for November data, saying, “Machinery orders are pausing.” The three-month moving average rose 0.9% in the November-January period after falling 1.0% in October-December.
* Core orders rebounded 4.5% from a year earlier in January after falling 6.6% in December and 3.7% in November, which was the first drop in 20 months. It was stronger than the median economist forecast of a 3.4% drop (forecasts ranged from 6.9% to 2.7 decreases).