Core machinery orders, a closely watched indicator of corporate spending, dropped 5.4 percent in April, the government said Wednesday, dimming prospects for a quick economic recovery.
The April result was far worse than the average forecast among market analysts of a 0.6 percent month-on-month rise in core machinery orders.
The value of orders was the lowest in 22 years, suggesting companies are wary of investing while the economy is mired in its steepest recession since World War II stemming from an unprecedented collapse in global demand.
“Companies are very reluctant to spend, as they have yet to see signs showing the economy has bottomed,” said Tetsuya Igarashi, an official in the Cabinet Office, which released the data.
The economy shrank at an annual pace of 15.2 percent in the January-March period, the steepest drop since 1955, the government said in May.
The value of core private-sector machinery orders, which exclude volatile orders from electric power companies and shipbuilders, tumbled from March to ¥688.8 billion, the lowest since April 1987’s ¥674.6 billion.
“In the face of sluggish exports and weak domestic demand, companies are cautious over new investments,” said Hiroshi Watanabe, an economist at Daiwa Institute of Research.
“Uncertainty over the direction of the global economy continues to weigh on corporate sentiment,” he said. “It is likely that core machinery orders will be flat in the latter part of the year.”
April’s 5.4 percent fall was the steepest decline since November, when machinery orders dropped a revised 12.2 percent, the government said. The orders also fell for the second consecutive month.
Machinery orders in the manufacturing sector dropped 9.4 percent month-on-month, while those among nonmanufacturers fell 8.8 percent.
Orders from the regular machinery sector plunged 44.3 percent month-on-month, while those from the metals sector were down 23.5 percent.
The Cabinet Office predicted core machinery orders from April to June will fall by 5 percent from the January-March quarter.
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