Japan Investment May 2019

Japan

Japan: Machinery orders plummet in May amid mounting global trade tensions

July 8, 2019

Core machinery orders, a leading indicator for capital spending over a three- to six-month period, posted the largest contraction in eight months in May, suggesting that trade tensions between China and the United States are weighing on global demand and impacting on capital expenditure. Headline machinery orders (private sector, excluding volatile orders) fell 7.8% over the previous month in seasonally-adjusted terms in May, contrasting the 5.2% rise in April. The print undershot the 4.7% decrease expected by market analysts.

Both overall manufacturing books and non-manufacturing orders contracted in May, while export orders posted the second consecutive decline in the same month.

Compared to the same month of the previous year, core machinery orders fell 3.7% in May, contrasting Aprils’ 2.5% increase. The annual average growth in core machinery orders dropped from 2.3% in April to 1.3% in May.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.8% in 2019, which is unchanged over last month’s projection. In 2020, the panel sees private non-residential investment expanding 1.0%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 1.5% in 2019, which is unchanged over last month’s projection. In 2020, the panel sees gross fixed investment growth at 0.9%.


Author: Ricard Torné, Lead Economist

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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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