By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, took a breather in June after three months of gains, but they appear to be headed for a sharp gain in the July-September quarter after a rebound in April-June, data released Wednesday by the Cabinet Office showed.
Orders from manufacturers marked the third straight rise while those from non-manufacturers posted the second consecutive gain.
Japan’s GDP data released Monday showed the economy rebounded more strongly than expected in April-June, led by solid business investment and surprisingly resilient consumption despite on-and-off restrictions on economic activity during the pandemic.
Real GDP grew 0.3% on quarter, or an annualized 1.3%, in Q2, following an upwardly revised 0.9% decline (annualized -3.7%) in Q1, which was the first contraction in three quarters. Business investment rose 1.7% on quarter in Q2, the first q/q rise in two quarters after slipping 1.3% in Q1. It added 0.3 percentage point to Q2 GDP growth.
The key points from machinery orders data:
Core machinery orders, which exclude volatile orders for power generation equipment and ships, dipped a seasonally adjusted 1.5% on month in June, coming in stronger than the median economist forecast for a 2.8% drop. It was the first decrease in four months after +7.8% in May.
The decrease was led by orders from electrical machine makers for computers as well as those from “other non-manufacturers” for electrical measuring instrument.
In the April-June quarter, the core reading rebounded 4.6% (above the official forecast of +2.5%) from January-March, when it slipped 5.3%. It is projected by the Cabinet Office to surge 11.0% q/q in July-September.
Core orders jumped 18.6% from a year earlier in June, the third straight y/y rise after +12.2% in May. It was stronger than the median economist forecast for a 15.8% gain. This is in reaction to a 10.4% drop in the April-June period of 2020, when the first wave of the pandemic dampened global demand.
The Cabinet Office maintained its assessment after upgrading it last month, saying, “Machinery orders are showing a pickup.” Previously, it had said, “Machinery orders are marking time in the pickup phase.”
Contact this reporter: max@dgulino
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