Core machinery orders down 13.6% in August

Japan’s core private-sector machinery orders fell a seasonally adjusted 13.6 percent in August from July to 767.6 billion yen, the first fall in five months and the largest margin of decline since March 1997, the Cabinet Office said Tuesday.

The figure represents an unadjusted 20.3 percent drop from 12 months earlier for the 15th consecutive year-on-year decline.

“It was a very bad figure, but the situation is less serious than it suggests,” a senior Cabinet Office official said.

He said the substantial fall in orders was partly a reaction to increases through July.

Despite the decline, the office left its assessment of Japan’s machinery orders unchanged, saying, “Machinery orders are showing signs of bottoming out.”

The office last upgraded its assessment of machinery orders on the basis of July data in September, improving it for the third straight month.

The official also said capital investment may move toward an improvement.

“Corporate capital investment may show signs of bottoming out toward the end of the current fiscal year,” the official said. Private-sector machinery orders are considered a leading indicator of corporate capital spending six to nine months ahead.

Core private-sector orders exclude orders for ships and from electric power companies, which tend to be volatile because of their huge scale.

The official said the office’s forecast of a 3.9 percent quarterly fall in the July-September quarter will be achieved if the core machinery orders rise 5.4 percent on the month.

In August, orders from manufacturers fell 17.2 percent from July to 283.2 billion yen, down for the first time in three months, while core orders from nonmanufacturers fell 5.1 percent to 520.2 billion yen.

Of the 17 manufacturing industries surveyed, machinery orders from 13 sectors declined, with those from the electrical machinery industry plunging 24 percent and those from automakers falling 21.4 percent.

In terms of nonmanufacturers, orders from the telecommunications sector fell 11.5 percent while those from financial institutions and insurance firms dropped 18 percent.