Japan’s core private-sector machinery orders fell a seasonally adjusted 4.3 percent in August from July, indicating that a recovery in capital spending may lose momentum in the months ahead, according to government data released Wednesday.
The core orders totaled 884.8 billion yen in the latest reporting month. The fall marked the second consecutive month of declines, following a 3.1 percent drop in July, the Cabinet Office’s Economic and Social Research Institute said.
Compared with a year earlier, the August core orders rose an unadjusted 12.2 percent.
Core private-sector machinery orders are considered a leading indicator of corporate capital spending six to nine months ahead. They exclude orders for ships and from electric power companies, which tend to be volatile due to their huge size.
Recovery in capital investment is one of the main pillars supporting Japan’s recent economic expansion. Helped by the rebound, the economy grew an annualized 3.9 percent in the April-June quarter.
While acknowledging the drop in August as a sign of weakness, the government said it is maintaining its basic assessment that machinery orders are on a gradual rising trend.
“Although there is weakness in the immediate situation, the basic trend is one of gradual increase,” a Cabinet Office official said.
The official said, however, that it is questionable whether the government’s forecast of a 2.2 percent rise in the July-September period can be met. Core machinery orders would have to rise 14.4 percent in September for the target to be achieved.
According to the Cabinet Office, orders from manufacturers fell 5.7 percent in August from a month earlier to 339.6 billion yen, following a 6.8 percent decline in July and a 0.8 percent drop in June.
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