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Japan: Machinery orders expand for third consecutive month in August

October 9, 2014

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) expanded in August for the third consecutive month, suggesting that investment should become one of the main engines for growth in the months to come. Headline machinery orders (private sector, excluding volatile orders) expanded 4.7% in August over the previous month in seasonally-adjusted terms, which followed the 3.5% increase recorded in July. The print topped market analysts’ forecasts for an increase of 0.5%.

Overall manufacturing orders declined in August, while non-manufacturing books rebounded. In addition, export orders expanded strongly in the same month.

Compared to the same month last year, core machinery orders fell 3.3% in August, which contrasted the 1.1% increase tallied in July. As a result, the trend continued to point downward; annual average growth in core machinery orders decreased from 9.2% in July to 8.1% in August, which represented a seven-month low.

The Cabinet Office upgraded its assessment of machinery orders, stating that they are in, “a moderate pick-up move.” In addition, businesses surveyed by the Cabinet Office predict that there will be a 2.9% increase in the third quarter, contrasting the 10.4% drop in the second quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 8.1% in 2014, which is down 0.5 percentage points over last month’s projection. In 2015, the panel sees private non-residential investment expanding 3.3%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 5.5% in 2014, which is up 0.1 percentage points over last month’s projection. In 2015, the panel sees gross fixed investment growth at 1.2%.


Author: Ricard Torné, Lead Economist

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Japan Investment August 2014

Note: Month-on-month changes of seasonally adjusted core machinery orders and year-on-year growth rate in %.
Source: Ministry of Economy, Trade and Industry (METI) and FocusEconomics calculations.


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