–Higher Orders Reflect Easing Impact of Suspended Vehicle Output Over Safety Scandal
–Core Orders Mark 1st Y/Y Rise in 13 Months Amid Solid Capex Plans
–Cabinet Office: Machine Orders Showing Signs of Pickup Vs. Weakening
By Max Sato
(MaceNews) – Japanese core machinery orders, the key leading indicator of business investment in equipment, beat most expectations to post a second straight monthly rise, up 2.9% in March, following a much stronger-than-expected 7.7% gain to a 13-month high in February, prompting the government to upgrade its view for the first time in two years, data released Wednesday by the Cabinet Office showed.
The latest figure was firmer than the median economist forecast of a 1.1% pullback (forecasts ranged widely from a 3.9% drop to a 5.0% rise). Orders from manufacturers surged 19.4% on the month, led by demand for engines and computers, after a 9.4% rise in February and a 13.2% plunge in January. Those from non-manufacturers posted the first drop in three months, slumping 11.3% after a 9.1% rise and a 6.5% gain, hit by lower orders for construction equipment and despite continued solid demand for computers.
Core machinery orders, which track the private sector and exclude volatile orders from electric utilities and for ships, marked the first year-over-year rise in 13 months, up 2.7%, also above the consensus call of a 2.3% rise, following a smaller-than-expected 1.8% dip in the prior month.
Core orders rose a solid 4.4% on quarter in the January-March quarter after falling 1.3% in October-December but failed to match the official forecast of a 4.9% rebound provided in February. The forecast was based on the Cabinet Office survey concluded by Dec. 25, which means the effects of the powerful New Year’s Day earthquake and suspended production by the Toyota Motor group over a vehicle safety scandal from late December until mid-February were not reflected.
Looking ahead, the Cabinet Office forecast that core orders are likely to slip back 1.6% in the April-June quarter for the first drop in two quarters, which are expected to be pulled down by both the manufacturing and non-manufacturing sectors in payback for recent gains. “But the decline is expected to be limited and the moving average of core orders rose for the second straight month in March,” a Cabinet Office official told Mace News.
The Cabinet Office upgraded its assessment for the first time since its April 2022 report, saying, “Machinery orders are showing signs of a pickup.” Previously, it said orders had “weakened” as it downgraded its view for the first time in more than a year in the January 2024 report.
Core orders rose to ¥913.0 billion on a seasonally adjusted basis in March after surging to ¥886.8 billion. Both amounts are the largest since ¥920.1 billion in January 2023. Companies have solid capex plans for fiscal 2024 that began on April 1, backed by strong demand for automation amid labor shortages as well as government-led digitization and emission control.