By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, powered ahead in May on solid demand for upgrading production capacity and information technology in a move to address labor shortages with automation and digitalized operations, data released Monday by the Cabinet Office showed.
Orders from manufacturers marked the second straight month-on-month gain while those from non-manufacturers posted the first rise in two months.
Japanese firms in many industries reported their sentiment improved sharply in June from three months earlier on strong global demand and accelerated coronavirus vaccinations, but some sectors were cautious about their outlook amid fears that the more contagious Delta variant could choke economic growth, according to the Bank of Japan’s quarterly Tankan business survey released on July 1.
The BOJ survey also showed that many sectors revised up their plans for business investment in equipment in fiscal 2021 ending next March in line with a recovery in global demand.
The key points from machinery orders data:
* Core machinery orders, which exclude volatile orders for power generation equipment and ships, surged a seasonally adjusted 7.8% on month in May, coming in much stronger than the median economist forecast for a 2.6% rise. It was the third straight m/m gain after +0.6% in April.
* The increase was led by orders from electrical machine makers for computers and “other manufacturers” for industrial robots as well as those from “other non-manufacturers” for computers, telecommunications firms for telecom and transport equipment and the financial industry for computers.
* The core reading appears on course to rebound in the April-June quarter from January-March, when it fell 5.3% on quarter in reaction to Q4’s 12.9% surge. When the Cabinet Office released March data about two months ago, it projected core orders would rise 2.5% in Q2.
* Core orders jumped 12.2% from a year earlier in May, the second straight y/y rise after +6.5% in April. It was also well above than the median economist forecast for a 6.3% gain. This reflects a rebound from the slowdown in the April-June period of 2020, when the first wave of the pandemic dampened global demand.
* The Cabinet Office upgraded its assessment after downgrading it in April, saying, “Machinery orders are showing a pickup.” Previously, it had said, “Machinery orders are marking time in the pickup phase.”
* The Cabinet Office upgraded its assessment after downgrading it in April, saying, “Machinery orders are showing a pickup.” Previously, it had said, “Machinery orders are marking time in the pickup phase.”
* Orders from overseas, which are not part of the core measure, marked the second consecutive increase on month, up 11.4% in May, after +46.2% in April. From a year earlier, this category also recorded the second straight year-on-year rise, up 125.7%, after +67.8% the previous month.