A four-month slump in foreign orders for Japanese machinery may be the latest sign that waning demand is threatening to derail the global economic recovery.
Overseas orders fell 5.9 percent in June for the longest losing streak since comparable data became available in 2005, the Cabinet Office said Thursday. The value has dropped more than a fifth from its most recent peak in February.
Economists and governments from the U.K. to Japan to Australia are cutting growth outlooks in the second year of the recovery from the Great Recession in 2009. Reports this week showing weaker U.S. and German exports and slower-than-forecast industrial production in China underscore that demand was faltering even before an equity market rout.
“When there are no signs of a recovery in foreign orders even when production is rebounding from supply shocks, that indicates global demand is weakening,” said Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo and published author of books on deflation and the economy.
The Cabinet Office on Friday cut its growth forecast for this year, predicting gross domestic product will increase 0.5 percent in the year started April 1, compared with a January forecast for a 1.5 percent expansion.
The Reserve Bank of Australia on Aug. 5 lowered its GDP forecast for this year to a 2 percent expansion from 3.25 percent, and riots across the U.K. are darkening its economic prospects as a sovereign debt crisis threatens to envelope the eurozone.
The recent Japanese data suggest that exports, which were already declining after the March 11 record earthquake disrupted production and shipping, may not rebound enough to help the economy grow later this year.
Business prospects for companies from Sony Corp. to Nissan Motor Co. are also being hurt by the yen’s 8.5 percent surge in the past six months and the stock rout spurred by waning investor confidence in prospects for the U.S. and Europe.
U.S. exports in June declined the most since January 2009 and Germany’s shipments abroad dropped 1.2 percent that month from May, separate government reports showed this week.
China’s industrial output rose 14 percent in July from a year earlier, the National Bureau of Statistics said Tuesday, compared with the 14.6 percent median estimate in a Bloomberg News survey of 23 economists and a 15.1 percent gain the previous month.
Meanwhile, foreign machine tool orders slipped 10.7 percent in July from a month earlier, according to a separate report this week compiled by the Japan Machine Tool Builders’ Association, which economists also use to gauge export demand.
Tokyo Electron Ltd., the world’s second-largest maker of semiconductor equipment, cut its net income forecast for the year ending in March by 49 percent to ¥34 billion, citing lower-than-expected sales.
Exports are already at risk from the yen’s advance toward a postwar high against the dollar. Authorities sold the currency for the first time since March on Aug. 4 to stem its advance, with Finance Minister Yoshihiko Noda saying such moves would imperil the nation’s rebound from the earthquake.
Sony, the nation’s largest exporter of consumer electronics, is among companies that have lowered sales forecasts as a stronger currency reduces competitiveness. Nissan Motor said the yen’s level shaved its operating profit by ¥55 billion in the quarter ended June 30.
“The unpredictability of the currency is adding to the shock factor for companies,” said Naoki Iizuka, a senior economist at Mizuho Securities Co. in Tokyo.
Japan’s economy probably contracted at a 2.5 percent annual rate in the three months that ended in June, according to the median forecast of 25 economists surveyed by Bloomberg News. Exports probably accounted for most of the contraction, they said. Japan is scheduled to release second-quarter GDP figures Monday.
Power and supply constraints, along with damaged factories, were thought to have been the main drag on the economy in the second quarter after the March disasters left more than 20,000 dead or missing. Easing disruptions to manufacturing prompted the Bank of Japan to raise its assessment of the economy this month.
Industrial production has risen for three straight months since plunging in March and companies forecast they will boost output this month as well to make up for lost capacity resulting from the earthquake. The nation’s largest firms expect to increase spending 4.2 percent in the year ending March 2012, according to the BOJ’s “tankan” business sentiment survey.
Not all companies are forecasting weak demand this year. Nikon Corp., the world’s second-largest maker of single-lens reflex cameras, raised its full year profit forecast on overseas sales. Net income may total ¥60 billion in the year ending March 31, 43 percent more than the company’s previous prediction, it said this week. It was able to procure camera parts more quickly than it had expected after the earthquake.
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