–Japan Capex Demand Solid, Leading Upward Revision to Q2 GDP Growth
–Japan July Core Orders’ Value Hit 3-Year High, Led by Non-Manufacturers
–Japan Govt Keeps View: Machine Orders Showing Signs of Pickup
–Cabinet Office Official: Machine Orders Not So Strong Yet to Prompt View Upgrade
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, unexpectedly jumped on volatile train orders from postal services in July after a slight rebound in June, staying on a gradual pickup trend amid solid corporate demand for digitalization and emission control, data released Wednesday by the Cabinet Office showed.
Last week, Japan’s consumption-led economic growth in the April-June quarter was revised up sharply to 0.9% on quarter (3.5% annualized) from 0.5% (2.2% annualized) as business investment in equipment turned out to be stronger than initially estimated and the drawdown of private inventories was smaller.
Record profits are prompting major firms to boost capacity, which has been delayed during Covid public health restrictions and global supply disruptions.
The key points from machinery orders data:
- Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, rose 5.3% from the previous month on a seasonally adjusted basis to Y966.0 billion in July, which was the largest amount since Y973.5 billion in June 2019. It followed a 0.9% rise in June, a 5.6% drop in May and an unexpected 10.8% surge in April. The July figure came in much stronger than the median economist forecast for a 0.6% dip (forecasts ranged from a 1.5% drop to a 1.5% gain).
- The Cabinet Office maintained its assessment after upgrading for the first time in four months in June for April data, saying, “Machinery orders are showing signs of a pickup.” The three-month moving average rose just 0.1% in the May-July period after rising 1.7% in April-June. “That’s why we left our assessment unchanged,” a Cabinet Office Official told Mace News. “Machinery orders are not so strong yet.”
- Orders from manufacturers fell 5.4% on the month in July after a 5.4% rebound in June while those from non-manufacturers recorded the first rise in three months, soaring 15.1% for the largest increase since a 19.6% surge in November 2019, mainly due to postal services’ orders for trains, a volatile factor in the core reading. There were no large one-off orders in the core data.
- The increase was also led by higher orders for transport equipment from real-estate firms and for communications equipment from the telecommunications industry. The decline in orders from the manufacturing sector was mostly due to slower demand for computers from electric machinery makers.
- Machinery orders made a firm start to the third quarter after core orders jumped 8.1% on quarter in the April-June quarter and fell 3.6% in January-March. The Cabinet Office projected last month that core orders would slip 1.8% in July-September. If core orders fell 5.6% in each of August and September, they would meet the official projection. If core orders were flat for the rest of the quarter, they would post a 3.9% rise in Q3.
- Core orders also jumped 12.8% from a year earlier in July for the 16th straight rise after rising 6.5% in June. It was much higher than the median economist forecast of a 6.6% rise (forecasts ranged from +4.0% to +7.9%).
- Orders from overseas, which are not part of the core measure, slipped 2.4% on the month in July after decrease of 4.6% in June and 2.4% in May and a 52.1% surge in April. This category showed a modest 3.0% rise on the year amid signs of slower global economic growth. The pace of double-digit percentage gains had decelerated to 26.4% in June from 28.3% in May and 38.2% in April.
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Contact this reporter: max@macenews.com
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