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Japan: Machinery orders continue to climb on the back of the reconstruction

August 10, 2011

Machinery orders, a leading indicator of capital spending over a three to six month period, continued to surprise on the upside in June, as economic activity picked up steadily amid easing supply chain constraints and the restoration of earthquake-stricken facilities. In June, core machinery orders (private sector, excluding volatile orders) expanded a seasonally-adjusted 7.7% over the previous month, which came on top of a 3.0% expansion in May and well above market expectations that had orders gaining 1.8%. Compared to the same month last year, core machinery orders climbed 17.9%, which came in well above both the 10.5% tallied in the previous month and the 11.3% expected by market analysts. The June increase was the result of a marked expansion in both non-manufacturing and manufacturing orders, in particular from the automobile sector. On the downside, demand for machinery from overseas, which indicates future shipments, fell down for the fourth consecutive month, reflecting rising concerns over a global slowdown. Meanwhile, the Cabinet Office upgraded its basic assessment, underscoring that machinery orders are picking up as a trend. For the July-September quarter, the Cabinet Office forecasted core machinery orders to edge up 0.9% from the preceding quarter, which still bodes well for investment growth in the months ahead.


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