Japan: Machinery orders expand at a faster rate in November

Growth in core machinery orders—a leading indicator of capital spending over a three to six month period—accelerated in November, indicating that Japanese firms are ramping up their capital expenditure amid buoyant global demand. Headline machinery orders (private sector, excluding volatile orders) shot up 5.7% in November from the previous month in seasonally-adjusted terms, defying market expectations of a 1.4% decline. The November reading follows a 5.0% growth print in October.

Overall, non-manufacturing orders soared in November, while manufacturing books minimally declined. The growth in export orders remained stable compared to October, signaling that global demand is still supporting the expansion of capital expenditures.

Compared to the same month of the previous year, core machinery orders rose 4.1% in November, a marked acceleration from the 2.3% growth recorded in October. However, the annual average variation in core machinery orders declined from 0.2% in October to minus 0.1% in November.

Japan Investment Forecast

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 2.8% in 2018, which is up 0.4 percentage points from last month’s projection. In 2019, the panel sees private non-residential investment expanding 2.2%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 1.8% in 2018, which is down 0.1 percentage points from last month’s estimate. In 2019, the panel sees gross fixed investment growth at 1.4%.