–Q2 Core Orders -0.2% Q/Q, Easily Beating -1.6% Official Forecast as Largely Expected
–Q3 Core Orders Seen Up Modest 0.2% Q/Q, Indicating Uncertainty over Global Growth; June Core Orders Mark 1st Y/Y Drop in 4 Months
–Cabinet Office Keeps View After Last Month’s Downgrade: Pickup in Machine Orders Pausing
By Max Sato
(MaceNews) – Japanese core machinery orders, the key leading indicator of business investment in equipment, posted their first increase in three months in June, up 2.1% on the month, after falling 3.2% in May and 2.9% in April, backed by the need to digitize and automate operations amid widespread labor shortages, data released Monday by the Cabinet Office showed.
The indicator, which tends to fluctuate sharply from month to month, came in much stronger than the median economist forecast of a 0.9% increase (forecasts ranged from a 1.0% drop to a 5.2% rise). Orders were led by engines from shipyards and computers from business machine makers, wholesalers/retailers and telecommunications firms.
The Cabinet Office projects core orders will rise 0.2% in the July-September period. It maintained its assessment after downgrading its assessment for the first time in four months in July, “The pickup in machinery orders is pausing.” Previously, it said, “Machinery orders are showing signs of a pickup.” The three-month moving average of core orders fell 1.4% in the April-June period after falling 1.1% in March-May and rising 2.4% in February-April.
Some firms remain cautious amid slowing global demand and elevated costs but companies in general have solid plans for investing in automation amid labor shortages and in digitization and emission control, which was confirmed in the Bank of Japan’s latest quarterly Tankan survey for June released in early.
Orders from manufacturers dipped 0.3% on the month in June after rising 1.0% in May, slumping 11.3% in April and soaring 19.4% in March. Orders from non-manufacturers rebounded 2.4% after falling 7.5% in May and rebounding 5.9% in April and dipping 11.3% in March.
Core machinery orders, which track the private sector and exclude volatile orders from electric utilities and for ships, showed their first year-over-year drop in four months, down 1.7%, after increases of 10.8% in May, 0.7% in April and 2.7% in March, which was the first rise in 13 months. It was much weaker than the consensus forecast of a 7.1% increase.
Core orders rose to ¥876.1 billion on a seasonally adjusted basis in June after falling to a four-month low of ¥857.8 billion in May and slipping to ¥886.3 billion in April and surging to ¥913.0 billion in March, which was the largest since ¥920.1 billion in January 2023.