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Japan: Machinery orders plunge for second month in a row

December 8, 2011

Machinery orders, a leading indicator of capital spending over a three to six month period, fell for a second straight month, which suggests that Japanese manufacturers are really struggling with the yen at a record high, a deepening European debt crisis and weak global demand. In October, core machinery orders (private sector, excluding volatile orders) dropped a seasonally adjusted 6.9% over the previous month, which was, nevertheless, above the 8.2% contraction seen in September. The reading undershot market expectations that had orders rising 0.5%. The contraction was the result of a marked deterioration in non-manufacturing orders, whereas manufactory orders rebounded. Moreover, overseas demand for machinery, which determines future exports, rose a paltry 1.6%, after plummeting a sharp 21.7% in September. Compared to the same month last year, core machinery orders rose 1.5% in October, which was well below both the 9.8% expansion recorded in the previous month and the 9.4% jump expected by market analysts. According to the Cabinet Office, although machinery orders in Japan had been on a slight recovery trend, the movement stopped and the orders' growth turned roughly flat from around summer amid rising concerns over the course of the economy. In addition, the Cabinet expects that machinery orders will contract 3.8% in the fourth quarter.


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