Machinery order results for May raise hopes for quarter

Core private-sector machinery orders marked a smaller-than-expected fall of 2.1 percent in May from the previous month, stirring hopes of good results for the April-June quarter, the government said Thursday.

The core orders — excluding those for ships and from electric power companies, which tend to vary widely due to their magnitude — totaled 997.100 billion yen, down from 1.018 trillion yen in April, the Cabinet Office said.

The figure represents an unadjusted 8.8 percent increase from a year earlier, it said. Private-sector machinery orders are considered a leading indicator of corporate capital spending six to nine months ahead.

The seasonally adjusted 2.1 percent decline in the reporting month came after core machinery orders soared 11.8 percent in April.

Private-sector economists polled by Kyodo News expected a fall of around 4.3 percent for May.

“Both the value of orders from manufacturers and nonmanufacturers dropped in reaction to the high growth in April, but the margins of decline were smaller than our expectations,” a government official said.

The government maintained its assessment that core machinery orders are on a rising trend.

Private-sector economists echoed the government view, stating that growing capital investment might not lose momentum in the latter half of this year.

“The smaller-than-expected margin of decline underscored the strength in core machinery orders,” said Takehide Kiuchi, a senior economist at Nomura Securities Co.

The May results reduced the possibility that the core orders will remain in negative territory in the April-June quarter, following a 5.6 percent decline in the January-March period, Kiuchi said.

“With the rising trend in core orders, capital investment will not significantly slow down in the latter half of this year,” he said.

Orders from manufacturers fell 9.1 percent to 446.2 billion yen in May. Those from nonmanufacturers slipped 2.6 percent to 598.17 billion yen, while core orders from nonmanufacturers rose 3.0 percent to 548.49 billion yen.

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