Core private-sector machinery orders fell a seasonally adjusted 3.0 percent in November from the previous month, greatly exceeding economists’ predictions, and the government Thursday downgraded its key assessment for the first time in a year.
Core orders, a key indicator of future capital spending by companies that excludes volatile orders such as those placed by utilities, dropped for the third consecutive month to ¥723.0 billion. The rate of decline was sharply higher than an average 1.3 percent increase forecast by economists in a Kyodo News survey.
The trend for machinery orders in the country “has been picking up, but some weak development can be seen in nonmanufacturing industries,” the Cabinet Office said in its assessment. For October, it only said orders were “picking up.”
But the Cabinet Office also said the underlying trend remains underpinned by the robustness of manufacturing sectors, and that the overall picture remains positive.
“We don’t see any immediate adverse influence on machinery orders as a whole,” one of its officials said.
Nevertheless, the data added to the view that the economy is continuing to struggle because of sluggish domestic demand.
The value of overall machinery orders received by 280 select machinery makers in Japan, including those placed by the public sector and from overseas entities, fell 8.3 percent to ¥1.96 trillion, the first decrease in two months.
“Machinery orders have risen from their nadir, but momentum is still weak,” Yuriko Tanaka, an economist at Goldman Sachs Japan Co., said in a report.
“There are a number of negative factors concerning machinery orders, as earnings are influenced by slowing exports amid a stronger yen and by rising raw-material costs, while more companies are considering shifting their production bases abroad and the effects of the government’s fiscal stimulus have gradually diminished,” Tanaka added.
Orders from nonmanufacturers fell 10.5 percent to ¥413.2 billion, the second consecutive monthly decline following an 8.7 percent slide in October. The Cabinet Office highlighted the poor performances of the telecommunications, shipping and financial sectors.
Machinery orders from manufacturers meanwhile expanded 10.6 percent to ¥310.1 billion for the second straight monthly increase.
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