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Japan: Machinery orders plummet in January

March 11, 2013

Core machinery orders, a leading indicator of capital spending over a three to six month period, contracted the most in eight months, after three consecutive increases. Headline machinery orders (private sector, excluding volatile orders) fell a seasonally adjusted 13.1% over the previous month, contrasting the 2.8% increase tallied in December. In addition, the print largely undershot the 1.4% drop expected by market analysts.

Overall manufacturing orders contracted sharply in January, while the non-manufacturing category declined at a softer pace. Moreover, machinery orders from overseas, which determine future exports, declined for the second month in a row.

Compared to the same month last year, core machinery orders fell 9.7% in January, after declining 3.4% in December. Building on the negative reading, the trend continues to point downwards, with annual average growth in core machinery orders falling from minus 0.9% in December to minus 1.9% in January.

Despite the deterioration seen in January, the Cabinet Office maintained its assessment on machinery orders, stating that the trend "shows signs of a moderate pick-up in some sectors". In addition, the Office predicts a 0.8% rise in the first quarter this year, following the 2.0% increase posted in the fourth quarter of 2012.

FocusEconomics Consensus Forecast panellists expect investment to rise 0.6% in 2013, which is unchanged over the previous month's projection. In 2014, the panel sees investment expanding 2.5%.


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Japan Investment January 2013

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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