Japan: Machinery orders surprises to the upside in March
May 16, 2011
Machinery orders, a leading indicator of capital spending over a three to six month period, jumped unexpectedly in March, despite the power shortages and supply chain disruptions in the wake of the 11 March earthquake. In March, core machinery orders (private-sector, excluding volatile orders) expanded a seasonally adjusted 2.9% over the previous month, overshooting market expectations of a 10.0% decline and also contrasting February's 1.9% contraction (previously reported: -2.3% month-on-month). Compared to the same month last year, core machinery orders climbed 6.8%, which came in below the previous month's reading of 7.6%, but contrasted market expectations of an 8.0% contraction. The March improvement was the result of a marked expansion of non-manufacturing orders, while within manufacturing, automobiles plunged 18.2% over the previous month. The surprising March increase in core machinery orders indicates that companies have already begun to prepare for reconstruction. In fact, according to the same report, manufacturers see core machinery orders expanding as much as 10% in the second quarter (Q1: +3.5% quarter-on-quarter), which, if attained, would represent the fastest quarterly increase since the fourth quarter of 1989.