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Core private-sector machinery orders fell 6.2 percent in March, reverting to minus territory after rising in February for the first time in three months, the Cabinet Office said Monday.

The drop in orders, considered a leading indicator for corporate capital spending six to nine months ahead, follows a rise of 6.3 percent in February and a fall of 10.9 percent in January.

The orders represent an unadjusted 22 percent decline from a year earlier to 779.9 billion yen.

On a year-on-year basis, the fall marks the 10th consecutive month of decline, the longest since an 18-month downward streak between April 1998 and September 1999.

The core orders exclude orders for ships and from electric power companies, which tend to be volatile because of their large size.

In the January-March period, core private-sector machinery orders dropped 7.4 percent from the October-December period, far worse than the fall of 0.4 percent the office had earlier predicted.

“The drop was due to worse-than-expected figures in the nonmanufacturing industry,” said Yoshihiko Senoo, a senior economist at the Cabinet Office.

Senoo pointed to an 11 percent drop in orders from nonmanufacturers, down for the third straight quarter.

In contrast, orders from manufacturers rose a better-than-expected 2.6 percent in the April-June quarter from the previous period, up for the first time in five quarters.

Looking ahead, the Cabinet Office said it expects core private-sector machinery orders to post a 0.3 percent quarter-on-quarter fall in the April-June period.

However, Senoo said the drop in the second quarter could turn out to be bigger. “We cannot deny the possibility of a bigger decline.”

Senoo said the office’s assessment that machinery orders are on a “declining trend” remains unchanged for the seventh straight month.

“From the trend in machinery orders, corporate capital spending will likely remain sluggish throughout fiscal 2002,” he said.

In briefing reporters last month on machinery orders for February, Senoo predicted sluggish orders would continue during the first half of the current fiscal year.

But he said he now expects the weak trend to continue for the whole year.

In March, orders from manufacturers rose 10.9 percent from February amid firm demand for general machinery, mainly for exports, while orders from nonmanufacturers fell 14.8 percent due to weak demand from the financial, retail and telecommunication sectors.

Overall orders, including those from the government and overseas, as well as those placed by agents, slipped 5.7 percent from February to 1.727 trillion yen.

Public orders fell 11.2 percent to 274.7 billion yen, while those from overseas dropped 10.5 percent to 457.7 billion yen.

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