Japan: Machinery orders plunge in February
April 10, 2011
Machinery orders, a three to six month leading indicator of capital spending, dropped severely in February, even before the 11 March earthquake. In February, core machinery orders (private-sector, excluding volatile orders) contracted a seasonally adjusted 2.3% over the previous month, falling short of market expectations of a more moderate 0.9% decline and contrasting the previous month's expansion of a 4.2% expansion. In contrast, overall machinery orders, which include private sector, government and export orders, grew 1.9% over the previous month. The monthly drop was the result of a severe decline in non-manufacturing (-4.5% mom), particularly in transport, real estate and agriculture, which was mitigated by a 11.1% increase in manufacturing orders. Analysts expect that the March reading will begin to reflect the impact of the earthquake, as power and supply chain disruptions will drive machinery orders downwards.