Japan: Machinery orders plunge unexpectedly in April
June 16, 2011
Machinery orders, a leading indicator of capital spending over a three to six month period, unexpectedly declined in April. This represented a further sign that the nuclear crisis that followed the Tohoku earthquake has dampened corporate appetite for investment, as companies aim to contain capital spending until the reconstruction process is initiated. In addition, slower growth in other major economies, especially the U.S., may lead to capital spending plans being slashed. In April, core machinery orders (private sector, excluding volatile orders) contracted a seasonally adjusted 3.3% over the previous month, which contrasted expectations of a 1.7% increase as well as March's 1.0% expansion (previously reported: +1.9% month-on-month). Compared to the same month last year, core machinery orders slipped 0.2%, which contrasted the 9.1% rise tallied in the previous month and undershot market expectations of a 4.9% increase. The April deterioration was the result of a marked contraction in manufacturing orders, in particular from those sectors that were expected to be the main beneficiaries of the post-quake rebuilding process. Orders were down 29.0% from steelmakers, down 25.4% from the chemical industry and orders from petroleum and coal producers were 38.6% lower.