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Japan: Machinery orders contract in August for the third consecutive month

October 8, 2015

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) declined in August for the third consecutive month. While this mainly reflected uncertainty about the global economy and growth in China, it also ratchets up pressure on the Central Bank to act further to support the economy. Headline machinery orders (private sector, excluding volatile orders) declined 5.7% in August over the previous month, in seasonally-adjusted terms, which was a more pronounced fall than the 3.6% decrease recorded in July. The result contrasted the 3.2% increase that market analysts had expected.

While overall manufacturing orders declined at a softer rate in August, non-manufacturing fell at the fastest pace since May 2014. In addition, export orders in August contracted at the steepest rate in over one year, reflecting soft overseas demand for Japanese goods.

Compared to the same month last year, core machinery orders contracted 3.5% in August. The print notably contrasted the 2.8% expansion tallied in the previous month. Despite the downturn, the trend remained stable, with annual average growth in core machinery orders resting in August at July’s 3.9%.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.5% in 2015, which is down 0.7 percentage points over last month’s projection. In 2016, the panel sees private non-residential investment expanding 2.8%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to rise 0.7% in 2015, which is down 0.5 percentage points over last month’s projection. In 2016, the panel sees gross fixed investment growth at 1.7%.


Author: Ricard Torné, Lead Economist

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