JP: Machine Orders


Wed Aug 09 18:50:00 CDT 2017

Consensus Actual Previous
M/M Change 4.5% -1.9% -3.6%
Y/Y Change -5.2% 0.6%

Highlights
Japan's private sector machinery orders (excluding volatile items) fell 1.9 percent on the month (seasonally adjusted) in June after falling 3.6 percent in May. This was significantly weaker than the consensus forecast for an increase of 4.5 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) fell 5.2 percent on the year in June after an increase of 0.6 percent in May.

The month-on-month decline in orders in June was driven by the manufacturing sector, where orders dropped 5.4 percent. Manufacturing orders also fell 3.2 percent on the year in June after an increase of 1.0 percent in May. Non-manufacturing orders (excluding volatile items), in contrast, rose by 0.8 percent on the month in June though year-on-year growth weakened from a decline of 4.9 percent in May to a fall of 6.9 percent in June.

Officials expect private sector machinery orders (excluding volatile items) to grow by 7.0 percent on the quarter for the three months to September. This would be a strong rebound from the estimated fall of 4.7 percent in the three months to June and would imply a significant boost to headline economic growth from investment spending. Officials also forecast year-on-year growth in these orders to strengthen from a fall of 0.1 percent in the three months to June to an increase of 1.0 percent in the three months to September.The Bank of Japan also expects business investment to expand moderately in the near-term, in part driven by spending ahead of the 2020 Olympic games in Tokyo.


Definition
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.



Description
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.