Slow rebuilding hits machinery orders

April 3.3% fall another sign that recovery yet to take hold

Kyodo

Core private-sector machinery orders in April lost 3.3 percent from the previous month, marking an unexpected fall and adding to the view that reconstruction work following the March earthquake and tsunami has yet to fully accelerate, government data showed Monday.

The seasonally adjusted figure, excluding orders for ships and from utilities, dropped for the first time in four months to ¥711.9 billion, the Cabinet Office said.

Market participants had expected a continuing rise in the key indicator for future capital spending by Japanese firms, following growth of 1.0 percent in March, 1.7 percent in February and 4.0 percent in January.

Some industrial sectors that had been expected to become the main beneficiaries of rebuilding efforts after the March 11 disaster fared poorly, with orders from steelmakers down 29.0 percent, electric machinery makers 17.2 percent and the chemical industry 25.4 percent.

But the data also showed some signs of recovery from the disaster, with orders from vehicle and auto parts makers logging a rebound of 1.3 percent following an 18.0 percent decline in March. Telecommunications equipment makers registered a 14.2 percent rise.

The two sectors were among those severely affected by the disaster-caused supply chain disruptions in the country, which significantly slowed production by auto and high-tech manufacturers while putting serious downward pressure on Japanese exports.

“Machinery orders are declining in general, but looking at each sector, we should not be so pessimistic,” Mitsumaru Kumagai, chief economist at the Daiwa Institute of Research, said in his report. Supported by demand from reconstruction work, machinery orders “are expected to remain on an upward momentum.”

Hiroshi Shiraishi, economist at BNP Paribas Securities (Japan) Ltd., said the effect on orders from the earthquake is still mixed.

“We can expect strong demand as reconstruction work proceeds. But we are also facing growing uncertainty (over the economy) such as slower industrial output,” he said.

The Cabinet Office left unchanged its basic assessment of the reading, saying machinery orders have been “picking up as a trend but weak development can be seen in some sectors.”

The government said the natural disaster caused some companies to cancel their orders amid the deteriorating outlook for the Japanese economy.

In the reporting month, orders from manufacturers dropped 2.7 percent for the second straight monthly fall to ¥319.4 billion, also affected by a 15.0 percent slide in general machinery makers, much sharper than the 3.4 percent decline in March.

Orders from nonmanufacturers gained 2.9 percent, for the fourth consecutive month of increase, to ¥405.8 billion, with the real estate sector up 36.7 percent and the farm, forestry and fisheries industries gaining a combined 17.2 percent.

Overseas demand for Japanese machinery, an indicator for future Japanese exports, lost 2.1 percent to ¥890.0 billion, the second consecutive monthly fall.

Overall machinery orders, received by 280 select machinery makers in Japan and covering demand from the private and public sectors as well as from overseas, grew 3.1 percent to ¥2.035 trillion for the first rise in two months.

The office renewed its seasonal adjustment on machinery order data starting April, excluding mobile phones from the category of telecommunications equipment, citing their statistical nature of being more linked to individual consumption than to corporate capital spending.