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Japan: Machinery orders expand for third consecutive month in May

July 9, 2015

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) expanded in May for the third consecutive month, thereby signaling that Japanese firms are boosting investment in anticipation of stronger growth in the months to come. Headline machinery orders (private sector, excluding volatile orders) expanded 0.6% in May over the previous month in seasonally-adjusted terms, which followed the 3.8% increase recorded in April. The result contrasted the 4.9% decrease that market analysts had expected.

While overall manufacturing orders expanded in May, non-manufacturing books declined in the same month. On the upside, export orders rebounded in May, suggesting rising overseas demand for Japanese goods.

Compared to the same month of last year, core machinery orders rose 19.3% in May. The print marked a strong acceleration over the 3.0% increase tallied in the previous month and hit a 16-month high. As a result of the increase, the trend now points upward, with annual average growth in core machinery orders swinging from minus 0.2% in April to plus 2.2% in May.

The Cabinet Office maintained its assessment on machinery orders, stating that, “they are picking up.” Businesses surveyed by the Cabinet Office predict that there will be a sharp 7.4% decline in the second quarter, contrasting the 6.3% increase tallied in the first quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.0% in 2015, which is down 0.1 percentage points over last month’s projection. In 2016, the panel sees private non-residential investment expanding 2.9%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to drop 0.2% in 2015, which is unchanged over last month’s projection. In 2016, the panel sees gross fixed investment growth at 1.8%.


Author: Ricard Torné, Lead Economist

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Japan Investment May 2015

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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