Business / Economy

Core machinery orders rose 2.9% in September

Kyodo

Core private-sector machinery orders rose a seasonally adjusted 2.9 percent in September from the previous month to ¥831.6 billion, the government said Thursday, indicating a pickup in capital spending after the plunge following the April consumption tax hike.

The orders, excluding those for ships and from utilities because of their volatility, expanded for the fourth straight month after rising 4.7 percent in August and 3.5 percent in July, the Cabinet Office said.

Core machinery orders are regarded as a leading indicator of business investment that Prime Minister Shinzo Abe has viewed as a pillar of economic growth necessary to beat nearly two decades of deflation since he took office in December 2012.

The Cabinet Office maintained its view for the second month in a row, saying orders “have shown signs of a gradual pickup” after upgrading the assessment for August.

For the July-September quarter, machinery orders rebounded to grow 5.6 percent after tumbling 10.4 percent in April-June, their fastest pace of decline in over five years.

“The trend of expansion is becoming increasingly clear following plunges in April and May,” said Shotaro Kugo, an economist at Daiwa Institute of Research.

“Looking at the breakdown, orders rose in a wide range of industries in addition to favorable demand from manufacturers,” he said.

During September, orders from the manufacturing sector jumped 12.0 percent to ¥363.7 billion, lifted partly by big orders from the oil and coal industry sector, while those from nonmanufacturers rose 1.7 percent to ¥478.3 billion.

Orders from the electrical machinery industry as well as those from the communications and information service sectors also helped lift overall machinery orders, the office said.

Total orders, including those from the domestic public sector and abroad, rose 8.0 percent to ¥2.325 trillion.

Overall overseas demand for Japanese machinery, an indicator of future exports, dropped 9.4 percent to ¥955.2 billion after surging 29.1 percent in August.

On the outlook of core private-sector machinery orders in the October-December period, the Cabinet Office expects them to decline 0.3 percent from the previous quarter.

Kugo said that figure appears “considerably weak,” but he maintains the view that capital spending will maintain an upward trend as other data, such as the Bank of Japan’s “tankan” corporate survey, show that companies have an upbeat stance on investment.

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