Core private-sector machinery orders rose an unexpected 2.9 percent in March, adding to evidence that business investment has been recovering moderately, the government said Monday.
The Cabinet Office forecast relatively strong growth in the orders, a precursor of corporate capital spending in the country, for the April-June period. But analysts say the March result should not spark too much optimism as the negative impact from the March 11 earthquake and tsunami will continue for the foreseeable future.
The core orders, which exclude those for ships as well as from utilities due to their volatility, grew for the first time in two months to ¥777.6 billion. The seasonally adjusted result came in much stronger than the average market forecast of a 9.0 percent decrease in a Kyodo News survey.
As for fiscal 2010 ending in March, they grew 7.0 percent from the previous year to ¥9.0251 trillion, the first increase in four years.
In March, orders from manufacturing sectors dropped 0.4 percent to ¥357.1 billion for the first decline in three months, mainly affected by an 18.2 percent slide in orders by carmakers and a 17.4 percent fall in orders from nonferrous metal producers.
Those from nonmanufacturers rose 7.1 percent to ¥442.3 billion in the reporting month after the recent slump. They increased for the first time in three months, supported by the financial, telecommunications and information services sectors.
The government maintained its basic assessment of machinery orders, with the office saying the orders have been “picking up, although some weak development can be seen in nonmanufacturing industries.”
Overseas demand for Japanese machinery, an indicator for future Japanese exports, lost 11.4 percent to ¥933.9 billion, the second consecutive monthly fall.
Overall machinery orders, received by 280 select machinery makers in Japan and covering demand from the private and public sectors as well as from overseas, shed 15.8 percent to ¥2.0849 trillion, the first slide in four months.
During the January-March period, the core orders increased 3.5 percent quarter on quarter, a stronger reading than the earlier forecast 2.7 percent increase. The office expects a 10.0 percent hike in the three months through June.
Analysts warned against too much optimism, however.
The March result was a “good surprise” and came due apparently to many companies sticking to their prequake plans for business investment, said Masamichi Adachi, senior economist at JPMorgan Securities Japan Co., who pointed out that the momentum of capital spending had been strong ahead of the disaster.
But he also noted that the estimated expansion in the April-June quarter could be trimmed later due to the impact from the disaster, which has led to temporary supply-chain disruptions among major manufacturers and electricity supply shortages sparked by the nuclear power plant crisis.
In fiscal 2010, overall demand expanded a record 20.0 percent to ¥24.9649 trillion after sharp falls in the previous two years.
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