Core private-sector machinery orders shrank a seasonally adjusted 8.8 percent month-on-month in February, the government said Thursday, adding that the yardstick for capital spending had come to “a standstill.”
The Cabinet Office downgraded its basic view of the trend for the first time in 16 months, saying the orders — excluding those for ships and from utilities because of their volatility — fell to ¥769.6 billion.
Machinery orders are “showing a standstill in their growth trend,” it said. For three months until January, the government had said the orders were “on a growth trend.”
Analysts attributed the drop to a lack of confidence in private-sector conditions after the April 1 consumption tax hike. Reaction to a double-digit surge in January also contributed to the drop.
Koya Miyamae, senior economist at SMBC Nikko Securities Inc., said the end of last-minute purchases ahead of the tax hike, plus uncertainty over the future of the economy, are causing companies to tread warily on making capital investments.
“A slowdown in, or shrinkage of, domestic demand is inevitable throughout fiscal 2014,” he added.
In February, orders from the manufacturing sector fell 11.9 percent to ¥292.3 billion, while those from nonmanufacturers fell 8.4 percent to ¥468.0 billion, both down for the first time in two months.
By industry, the fall was especially significant in nonferrous metals, petroleum and coal products, and food processing, which plunged 78.3 percent, 57.3 percent and 38.4 percent, respectively.
Overall overseas demand for Japanese machinery, a sign of future exports, grew for the third month in a row, up 2.4 percent to ¥885.7 billion, it said.
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