| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -1.0% | -2.3% to 2.0% | -8.3% | 5.4% |
| Year over Year | 1.8% | 1.1% to 6.8% | -3.7% | 0.4% |
Highlights
Japanese machinery orders, the key leading indicator of business investment in equipment, plunged in November in reaction to a rebound October and amid slowing global demand, although capex plans among many sectors remain solid in fiscal 2022, data released Wednesday by the Cabinet Office showed.
In the latest Bank of Japan Tankan survey for the December quarter released last month, major firms slightly revised down their capital spending plans for the current fiscal year but their pace is still high at 19 percent above fiscal 2021, while smaller firms revised up their plans.
Some capital investment plans are being carried over from fiscal 2021, when the economy was hit by the wintertime spike in Covid cases and supply delays were aggravated by the Ukraine war. Capex is generally supported by demand for automation, government-led digital transformation and emission control.
The Econoday Consensus Divergence Index stood at minus 17, below zero, which indicates the Japanese economy is performing modestly below expectations after outperforming earlier in 2022. Excluding the impact of inflation, the index was at minus 27.
BoJ policymakers have said they would not consider raising interest rates at this point while inflation is not accompanied by solid wage growth and supply continues to exceed demand in the Japanese economy.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, slumped 8.3 percent from the previous month on a seasonally adjusted basis to ¥838.6 billion in November after rebounding an above-forecast 5.4 percent in November and falling 4.6 percent in September. The 5.3 percent rise to ¥966.0 billion in July 2022 was the largest amount since ¥973.5 billion in June 2019. The November figure came in much weaker than the median economist forecast for a 1.0 percent drop (forecasts ranged from a 2.3 percent drop to a 2.0 percent gain).
Core orders may still post a slight rebound in the final quarter of 2022 after falling 1.6 percent on quarter in July-September (the official forecast was a 1.8 percent decline) and surging 8.1 percent in April-June. The Cabinet Office projected in November that core measure would rebound 3.6 percent in the October-December quarter.
Orders from manufacturers fell 9.3 percent on the month in November for the third straight drop after falling 6.4 percent in October while those from non-manufacturers in the core measure marked the first drop in three months, slipping 3.0 percent after surging 14.4 percent.
The decrease in core orders in November was led by lower demand from producers of non-ferrous metals and fabricated metal products, two industries that had placed high orders in October. There was also a pullback in demand from information service providers and the farming, forestry and fishing sector after solid orders seen in the prior month. In line with slowing global economic growth, orders from manufacturers of electrical machinery and business machines dipped in November.
The Cabinet Office made a slight downward revision to its assessment after downgrading it in November, saying,"Machinery orders are pausing." Previously, it had said,"The move toward a pickup in machinery orders has paused." The three-month moving average posted the third consecutive decline with a 2.6 percent drop in the September-November period after falling 1.9 percent in August-October.
Core orders dipped 3.7 percent from a year earlier in November for the first drop in 20 months after rising a below-forecast 0.4 percent gain in October and a 2.9 percent rise in September. It was much weaker than the median economist forecast of a 1.8 percent rise (forecasts ranged from 1.1 percent to 6.8 percent increases).
In the latest Bank of Japan Tankan survey for the December quarter released last month, major firms slightly revised down their capital spending plans for the current fiscal year but their pace is still high at 19 percent above fiscal 2021, while smaller firms revised up their plans.
Some capital investment plans are being carried over from fiscal 2021, when the economy was hit by the wintertime spike in Covid cases and supply delays were aggravated by the Ukraine war. Capex is generally supported by demand for automation, government-led digital transformation and emission control.
The Econoday Consensus Divergence Index stood at minus 17, below zero, which indicates the Japanese economy is performing modestly below expectations after outperforming earlier in 2022. Excluding the impact of inflation, the index was at minus 27.
BoJ policymakers have said they would not consider raising interest rates at this point while inflation is not accompanied by solid wage growth and supply continues to exceed demand in the Japanese economy.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, slumped 8.3 percent from the previous month on a seasonally adjusted basis to ¥838.6 billion in November after rebounding an above-forecast 5.4 percent in November and falling 4.6 percent in September. The 5.3 percent rise to ¥966.0 billion in July 2022 was the largest amount since ¥973.5 billion in June 2019. The November figure came in much weaker than the median economist forecast for a 1.0 percent drop (forecasts ranged from a 2.3 percent drop to a 2.0 percent gain).
Core orders may still post a slight rebound in the final quarter of 2022 after falling 1.6 percent on quarter in July-September (the official forecast was a 1.8 percent decline) and surging 8.1 percent in April-June. The Cabinet Office projected in November that core measure would rebound 3.6 percent in the October-December quarter.
Orders from manufacturers fell 9.3 percent on the month in November for the third straight drop after falling 6.4 percent in October while those from non-manufacturers in the core measure marked the first drop in three months, slipping 3.0 percent after surging 14.4 percent.
The decrease in core orders in November was led by lower demand from producers of non-ferrous metals and fabricated metal products, two industries that had placed high orders in October. There was also a pullback in demand from information service providers and the farming, forestry and fishing sector after solid orders seen in the prior month. In line with slowing global economic growth, orders from manufacturers of electrical machinery and business machines dipped in November.
The Cabinet Office made a slight downward revision to its assessment after downgrading it in November, saying,"Machinery orders are pausing." Previously, it had said,"The move toward a pickup in machinery orders has paused." The three-month moving average posted the third consecutive decline with a 2.6 percent drop in the September-November period after falling 1.9 percent in August-October.
Core orders dipped 3.7 percent from a year earlier in November for the first drop in 20 months after rising a below-forecast 0.4 percent gain in October and a 2.9 percent rise in September. It was much weaker than the median economist forecast of a 1.8 percent rise (forecasts ranged from 1.1 percent to 6.8 percent increases).
Market Consensus Before Announcement
Japanese machinery orders, the key leading indicator of business investment in equipment, are forecast to have slipped 1.0 percent in November after posting their first rise in three months in October (up by an above-consensus 5.4 percent). Capex plans for fiscal 2022 are solid among many firms while global demand is slowing. Core orders are seen up 1.8 percent from a year earlier for a 20th straight rise after rising a below-forecast 0.4 percent in October and rising 2.9 percent in September.
The Cabinet Office maintained its assessment last month after downgrading it in November, saying,"The move toward a pickup in machinery orders has paused."
The Cabinet Office maintained its assessment last month after downgrading it in November, saying,"The move toward a pickup in machinery orders has paused."
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.
