Japan's private sector machinery orders (excluding volatile items) fell 3.2 percent on the month (seasonally adjusted) in January after an increase of 2.1 percent in December. This series, which excludes orders for ships and those from electric power companies, is considered a proxy for capital expenditures.
In original terms, machinery orders (excluding volatile items) fell 8.2 percent year-on-year in January after an increase of 6.7 percent in December. In seasonally adjusted terms, these orders fell 6.6 percent year-on-year in January after advancing by 7.6 percent in December.
The fall in headline orders in January was largely driven by the manufacturing sector, with higher costs for raw materials appearing to limit manufacturers' ability to spend on capital goods. Manufacturing orders fell 10.8 percent on the month in January after an increase of 0.8 percent in December, with year-on-year growth (in original terms) dropping sharply from an increase of 10.9 percent to a decline of 22.0 percent. Non-manufacturing orders (excluding volatile items) rose 0.7 percent month-on-month, down from an increase of 2.1 percent in December, with year-on-year growth (original) picking up from to 3.5 percent to 5.7 percent.
Despite the fall in January, officials expect orders to rebound in the next two months, forecasting an increase of 1.5 percent on the quarter for the three months to March.
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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