–Cabinet Office Keeps View: Machine Orders Pausing
By Max Sato
(MaceNews) – Japanese core machinery orders, the key leading indicator of business investment in equipment, posted a slight pullback on the month in July, as largely expected, after rebounding in June and slumping in May, amid sluggish demand for computers from many industries including electric equipment and auto makers, data released Thursday by the Cabinet Office showed.
Core orders marked their fifth straight decline from a year earlier, with the pace of decline accelerating from June.
For fiscal 2023 that began in April, capital investment is generally supported by demand for automation amid labor shortages as well as government-led digitization and emission control, but revised April-June GDP data released last week showed capex marked the first drop in two quarters amid uncertainty over global growth.
Japanese policymakers believe the economy needs continued monetary easing and fiscal spending to help achieve stable 2 percent inflation with sustainable wage growth. Real gross domestic product grew 1.2% on quarter in the second quarter, or an annualized 4.8%, the highest among the Group of Seven economies, but it was mainly due to a sharp rebound in net exports amid easing import costs and private consumption marked its first drop in three quarters.
Key points from machinery orders data:
* Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, fell 1.1% from the previous month on a seasonally adjusted basis to ¥844.8 billion in July after rising 2.7% to ¥854.0 billion in June and plunging 7.6% to ¥831.5 billion in May, which was the lowest since ¥825.2 billion in February 2022. The decrease in July was slightly larger than the median economist forecast of a 0.9% decline (forecasts ranged from a 2.5% drop to a 5.9% gain).
* Last month, the Cabinet Office projected that core orders would dip a further 2.6% in the July-September quarter, led by declines in orders from both the manufacturing and non-manufacturing sectors, after falling 3.2% in the previous quarter.
* Orders from manufacturers dipped 5.3% on the month in July for the first drop in three months after rising 1.6% in June, while those from non-manufacturers in the core measure rose 1.3% for the second straight month after surging 9.8% the previous month.
* The Cabinet Office maintained its assessment after downgrading it in January for the November data, saying, “Machinery orders are pausing.” The three-month moving average fell back 2.1% in the May-July period after being unchanged in April-June and falling 2.1% in March-May.
* Core orders plunged 13.0 percent from a year earlier in July, partly in reaction to a sharp 12.8 percent increase marked in July 2022. It followed decreases of 5.8 percent in June, 8.7 percent in May, 5.9 percent in April and 3.5 percent in March and a 9.8 percent jump in February. It was weaker than the median economist forecast of a 10.7 percent drop. Forecasts ranged from 12.2 percent to 4.7 percent falls.