Japan: Core machinery orders growth loses pace in August
Core machinery orders—which cover the private sector, exclude volatile orders and are a leading indicator for capital spending over the coming three-to-six-month period—grew 0.2% month-on-month in seasonally-adjusted terms in August, which was a marked deterioration from July’s 6.3% increase. However, the print came in above market expectations of a 1.0% fall in orders.
On an annual basis, machinery orders plunged 15.2% in August, a smaller decrease than July’s 16.2% fall and marked the best result since March. Meanwhile, annual average variation of machinery orders was unchanged at July’s 7.4% in August.
Regarding August’s reading, economists at Nomura commented:
“We think that the weakness in orders from non-manufacturers reflects stalled recoveries, particularly in areas such as consumer spending, owing to a further rise in COVID-19 cases in Japan from July. On the other hand, the number of new COVID-19 cases in the West in Jul-Aug was lower than before, and data such as manufacturing PMI readings have shown a recovery in overseas economies. While orders from manufacturers should also reflect overseas economic recoveries, we think that uncertainties about the Japanese economy may have had a stronger impact.”