Japan's private sector machinery orders (excluding volatile items) rose 1.5 percent on the month (seasonally adjusted) in February after dropping 3.2 percent in January. This falls well short of the consensus forecast for an increase of 3.9 percent. 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) rose 5.6 percent year-on-year in February after falling by 8.2 percent in January. In seasonally adjusted terms, these orders were flat on the year in February after declining 6.6 percent in January.
The rebound in headline orders in February was largely driven by the manufacturing sector, which posted an increase in orders of 6.0 percent on the month after dropping sharply by 10.6 percent in January. Year-on-year growth in manufacturing orders of machinery also strengthened from a decline of 22.0 percent to an increase of 9.5 percent. Within the manufacturing sector there was wide variation in the growth of orders among various industries.
Non-manufacturing orders (excluding volatile items) rose 1.8 percent on the month in February after an increase of 0.7 percent in January, with year-on-year growth (original) moderating from 5.7 percent to 2.7 percent. Growth in these orders also showed considerable variation between different industries within the sector.
Officials expect private sector machinery orders (excluding volatile items) to increase by 1.5 percent on the quarter for the three months to March, up from an increase of 0.3 percent in the three months to December.
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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