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Japan: Machinery orders soar in May

July 11, 2013

Core machinery orders, a leading indicator of capital spending over a three to six-month period, improved markedly in May, after the sharp drop witnessed in the previous month, which had represented the steepest fall seen since January 2009. Headline machinery orders (private sector, excluding volatile orders) soared a seasonally adjusted 10.5% over the previous month, contrasting the 8.8% decline tallied in April. In addition, the print was well above the 1.9% increase anticipated by market analysts.

In addition, both overall manufacturing orders and non-manufacturing books rebounded strongly in May, while machinery orders from overseas, which determine future exports, registered a significant expansion.

Compared to the same month last year, core machinery orders rose 16.5% in May, contrasting the 1.1% drop recorded in the previous month and marking the largest increase observed in almost two years. As a result of the strong expansion seen in May, the trend now points upwards, with annual average growth in core machinery orders rising from minus 3.6% in April to minus 2.5% in May.

Despite the monthly rise, the Cabinet Office maintained its assessment on machinery orders stating that "there are signs of a moderate pick-up". The Office predicts a 1.5% drop in the second quarter, which is below the flat reading recorded in the first three months of the year.

FocusEconomics Consensus Forecast panellists expect investment to rise 0.6% in 2013, which is down 0.7 percentage points over the previous month's projection. In 2014, the panel sees investment expanding 3.2%.


Author: Ricard Torné, Head of Economic Research

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Japan Investment May 2013

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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