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Japan: Machinery orders rebound in November

January 15, 2015

Although core machinery orders (a leading indicator of capital spending over a three- to six-month period) rebounded in November, the mild increase suggests that investment is struggling to regain momentum. Headline machinery orders (private sector, excluding volatile orders) rose 1.3% in November over the previous month, in seasonally-adjusted terms, which contrasted the 6.4% drop recorded in October. The print undershot market analysts’ forecasts for an increase of 5.1%.

Overall manufacturing orders declined again in November, while non-manufacturing books recorded a slight increase. Export orders contracted at a sharper pace in the same month.

Compared to the same month the previous year, core machinery orders fell 14.6% in November, which followed the 4.9% decrease tallied in the previous month. November’s print marked the steepest contraction since November 2009. As a result, the trend continued to point downward; annual average growth in core machinery orders decreased from 6.0% in October to 3.5% in November, which represented a 14-month low.

As a result of the deterioration observed in November, the Cabinet Office revised downward its assessment of machinery orders, stating that, “the recovery is showing signs of stalling.” Businesses surveyed by the Cabinet Office predict that there will be a 0.3% drop in the fourth quarter, contrasting the 5.6% increase tallied in the third quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.8% in 2015, which is down 0.3 percentage points over last month’s projection. In 2016, the panel sees private non-residential investment expanding 2.4%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 0.7% in 2015, which is down 0.1 percentage points over last month’s projection. In 2016, the panel sees gross fixed investment growth at 1.1%.


Author: Ricard Torné, Head of Economic Research

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Japan Investment November 2014

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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