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Japan: Machinery orders plummet in December

February 9, 2012

Machinery orders, a leading indicator of capital spending over a three to six month period, deteriorated in December after climbing to a four-year high in November. In December, core machinery orders (private sector, excluding volatile orders) contracted a seasonally adjusted 7.1% over the previous month, which contrasted the buoyant 14.8% expansion recorded in November. In addition, the decline exceeded market expectations that had orders dropping a softer 5.0%. The contraction was the result of a sharp deterioration of both manufacturing and non-manufacturing orders. Moreover, overseas demand for machinery, which determines future exports, rose 5.6% over the previous month, after surging 20.3% in November. Compared to the same month the year before, core machinery orders grew 6.3% in December, which halved the 12.5% expansion recorded in the previous month and also undershot the 8.5% rise expected by market analysts. In the full year 2011, machinery orders expanded 7.8%, which was above the 7.0% increase seen in 2010. The Cabinet Office expects that machinery orders will expand 2.3% in the first quarter this year, after bookings posted a smaller-than-expected 2.6% drop in the last quarter of 2011.


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