Japan's private sector machinery orders (excluding volatile items) rose 6.7 percent on the month (seasonally adjusted) in December after a fall of 5.1 percent in November, stronger than the consensus forecast for an increase of 3.1 percent. This series, which excludes orders for ships and those from electric power companies, is considered a proxy for capital expenditures.
In seasonally adjusted terms, orders rose 9.4 percent year-on-year in December (up from an increase of 3.6 percent in November), while the original data showed an increase of 6.7 percent (down from an increase of 10.4 percent).
Manufacturing orders rose 1.0 percent month-on-month in December after an increase of 9.8 percent in November, with year-on-year growth (in original terms) picking up from 8.3 percent to 10.9 percent. Non-manufacturing orders (excluding volatile items) rose 3.5 percent month-on-month, rebounding from a fall of 3.5 percent in November, with year-on-year growth (original) sliding from 116 percent to 3.5 percent.
In quarterly terms, private orders (excluding volatile items) fell 0.2 percent in the three months to December, suggesting GDP data for the quarter, scheduled for release next week, will show relatively subdued private investment spending. Officials, however, expect these orders to rebound in the three months to March, forecasting growth of 3.3 percent.
Machine Orders are the total value of new private-sector purchase orders placed with manufacturers for machines excluding volatile items such as ships and utilities. It is a leading indicator of production. Analysts consider the data an indicator of capital spending. Rising purchase orders signal that manufacturers will increase activity as they work to fill the orders.
It is a leading indicator of production. Rising purchase orders signal that manufacturers will increase activity as they work to fill the orders. The importance of machinery orders cannot be overstated given the economy's dependence on exports. The purpose of these data is to get a picture of machinery manufacturers' order books and to collect basic material for analyzing the direction of the economy through an early understanding of trends in capital investment in machinery.
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