Japan's private sector machinery orders (excluding volatile items) rose 1.4 percent on the month (seasonally adjusted) in March after an increase of 1.5 percent in February. This falls short of the consensus forecast for an increase of 2.5 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 0.7 percent on the year in March after increasing by 5.6 percent in February. In seasonally adjusted terms, these orders were flat on the year in March, as they were in February.
The fall in headline year-on-year growth in machine orders in March was mainly driven by the manufacturing sector, where orders fell 4.9 percent on the year after growth of 9.5 percent in February. Manufacturing orders also recorder weaker growth on the month in March, up just 0.6 percent compared with 6.0 percent in February. Within the manufacturing sector there again was wide variation in the growth of orders among various industries.
Non-manufacturing orders (excluding volatile items) also posted somewhat weaker year-on-year growth, down from 2.7 percent in February to 2.2 percent in March. These orders fell 3.9 percent on the month after an increase of 1.8 percent in February.
Officials expect private sector machinery orders (excluding volatile items) to fall by 5.9 percent on the quarter for the three months to June, weakening from a decline of 1.4 percent in the three months to March. They also forecast year-on-year growth in these orders to fall by 8.2 percent on the year in the three months to June after an increase of 3.1 percent in the three months to March. This suggests that GDP data will show weaker growth in investment spending in the current quarter.
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.