–Govt Keeps View After Downgrade Last Month: Pickup in Machine Orders Pausing
By Max Sato
(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, posted the first rise in three months in October, led by strong demand from non-manufacturers and reflecting solid capex plans for fiscal 2022, but uncertainty over global growth limited the gain from a year earlier, data released Wednesday by the Cabinet Office showed.
Data last week showed Japan’s real gross domestic product contracted 0.2% on quarter, or an annualized 0.8%, in the third quarter, revised up from the initial estimate of a 0.3%, or an annualized 1.2% decline, thanks to upward revisions to private sector inventories and net exports.
As seen in the preliminary GDP data for July-September released last month, a surge in imports led by high costs and easing supply bottlenecks slashed net exports in the third quarter, dampening the effects of resilient business investment and consumer spending.
The Bank of Japan would not consider raising interest rates while inflation is not accompanied by solid wage growth and supply continues to exceed demand in the Japanese economy. The BOJ board has projected inflation is unlikely to be anchored around its 2% target at least for the next few years, even after a temporary spike over 3% this year.
The key points from machinery orders data:
* Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, rose 5.4% from the previous month on a seasonally adjusted basis to Y914.7 billion in October after slumping 4.6% in September and 5.8% in August and rising 5.3% to Y966.0 billion in July, which was the largest amount since Y973.5 billion in June 2019. The October figure came in stronger than the median economist forecast for a 2.4% rise (forecasts ranged from a 3.0% drop to a 6.5% gain).
* Core orders made a firm start to the final quarter of 2022 after falling 1.6% on quarter in July-September (the official forecast was a 1.8% decline) and surging 8.1% in April-June. The Cabinet Office projected last month that core measure would rebound 3.6% in the October-December quarter.
* Orders from manufacturers fell 6.4% on the month in October after falling 8.5% in September, rebounding 10.2% in August and falling 5.4% in July while those from non-manufacturers in the core measure jumped 14.4% after rising 4.4% in September, plunging 21.4% in August and climbing 15.1% July, which was the largest increase since the 19.6% surge in November 2019.
* The Cabinet Office maintained its assessment after downgrading it last month, saying, “The move toward a pickup in machinery orders has paused.” Previously, it had said, “Machinery orders are showing signs of a pickup.” The three-month moving average fell 1.9% in the August-October period after dipping 1.8% in July-September and being unchanged in June-August. It had been trending up since the recent bottom hit during the early parts of 2020.
* Orders from overseas, which are not part of the core measure, were nearly flat, up just 0.2% on the month in October after rising 6.3% in September for the first gain in five months and plunging 18.9% in August. This category fell 0.7% from a year earlier in October after rebounding 14.8% in September and slipping 3.3% in August for the first fall in six months.