Business / Economy

Japan's core machinery orders fell 11.9% in December for largest monthly drop since 2014

Kyodo

Core private-sector machinery orders fell a larger-than-expected 11.9 percent in December from the previous month, reversing sharp gains recently supported by economic growth, government data showed Thursday.

The drop, the first in three months and the largest since May 2014, was largely a reflection of the sizable increase in November, the Cabinet Office said. The orders, which exclude those for ships and from utilities because of their volatility, totaled ¥792.6 billion ($7.4 billion).

The fall came after machinery orders, a key indicator of future corporate spending, grew 5.7 percent in November to their highest since June 2008.

The Cabinet Office retained its assessment that machinery orders continued to show signs of “picking up,” even though it noted that the drop in December was sharp.

“Given that it’s a double-digit fall, we decided to make a mention of the December outcome. But the basic view hasn’t changed and we believe the slump came in response to the sharp gains (from preceding months,)” a government official said at a briefing.

Machinery orders fell 0.1 percent in the quarter through December, much smaller than the 3.5 percent drop expected earlier. In the January-March quarter, orders are expected to climb 0.6 percent, the Cabinet Office said.

Domestic demand has shown signs of strengthening in recent quarters, with a pick-up in capital spending helping the economy, which marked eight consecutive quarters of expansion in October-December, the longest streak in 28 years.

Dragged down by weakness in the nonferrous metals sector, which placed large orders in November, orders from the manufacturing sector slid 13.3 percent in December to ¥364.8 billion.

Orders from the nonmanufacturing sector fell 7.3 percent to ¥445.7 billion, the first fall in three months, after November saw strong demand from the wholesale and retail industry.

Overseas demand for Japanese machinery, an indicator of future exports, slipped 13.2 percent to ¥957.2 billion

Total orders, including those from the domestic public sector and abroad, were down 14.9 percent to ¥2.33 trillion.

For the whole of 2017, core machinery orders fell for the first time in five years to ¥10.14 trillion, down 1.1 percent from a year ago.