| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | 2.8% | 1.4% to 6.8% | 1.6% | -8.3% |
| Year over Year | -5.9% | -7.3% to -2.1% | -6.6% | -3.7% |
Highlights
Japanese machinery orders, the key leading indicator of business investment in equipment, posted a modest rebound in December in reaction to a plunge in November as capex plans for digitization and green transformation remain solid for fiscal 2022 ending in March, data released Thursday by the Cabinet Office showed.
In the October-December quarter, the core measure of machinery orders posted a second consecutive quarterly drop, but the Cabinet Office expects a little over half of the decline in the second half of 2022 will be recovered in the first three months of 2023.
The Econoday Consensus Divergence Index stood at minus 28, below zero, which indicates the Japanese economy is performing worse than expected after outperforming earlier. Excluding the impact of inflation, the index was at minus 27.
Japanese policymakers have said the economy needs continued monetary easing and fiscal spending to support a full recovery from the pandemic-caused slump and guide inflation to stable 2 percent.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, rose 1.6 percent from the previous month on a seasonally adjusted basis to ¥851.9 billion in December after slumping 8.3 percent in November. It was weaker than the median economist forecast of a 2.8 percent rise (forecasts ranged from 1.4 percent to 6.8 percent gains). The 5.3 percent rise to ¥966.0 billion in July 2022 was the largest amount since ¥973.5 billion in June 2019.
Core orders fell 5.0 percent on quarter in the final quarter of 2022, coming in much weaker than the official forecast for a 3.6 percent rebound. It followed a 1.6 percent drop in July-September and an 8.1 percent rise in April-June. The Cabinet Office projected that core orders would rise 4.3 percent in the January-March quarter.
In the fourth-quarter GDP data released Tuesday, business investment in equipment marked its first drop in three quarters, down 0.5 percent on quarter, following solid gains of 1.5 percent in July-September and 2.1 percent in April-June. Capex trimmed the GDP by 0.1 percentage point in the fourth quarter after providing a positive 0.3-point contribution in each of the previous two quarters.
Orders from manufacturers fell 2.1 percent on the month in December for the first rise in four months after falling 9.3 percent in November while those from non-manufacturers in the core measure marked the second straight drop, down 2.5 percent, after a 3.0 percent dip.
The Cabinet Office maintained its assessment after downgrading it last month for November data, saying,"Machinery orders are pausing." The three-month moving average fell 0.6 percent in the October-December period after falling 2.6 percent in September-November.
Core orders dipped 6.6 percent from a year earlier in December after falling 3.7 percent in November, which was the first drop in 20 months, and rising 0.4 percent in October. It was weaker than the median economist forecast of a 5.9 percent drop (forecasts ranged from 7.3 percent to 2.1 percent decreases).
In the October-December quarter, the core measure of machinery orders posted a second consecutive quarterly drop, but the Cabinet Office expects a little over half of the decline in the second half of 2022 will be recovered in the first three months of 2023.
The Econoday Consensus Divergence Index stood at minus 28, below zero, which indicates the Japanese economy is performing worse than expected after outperforming earlier. Excluding the impact of inflation, the index was at minus 27.
Japanese policymakers have said the economy needs continued monetary easing and fiscal spending to support a full recovery from the pandemic-caused slump and guide inflation to stable 2 percent.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, rose 1.6 percent from the previous month on a seasonally adjusted basis to ¥851.9 billion in December after slumping 8.3 percent in November. It was weaker than the median economist forecast of a 2.8 percent rise (forecasts ranged from 1.4 percent to 6.8 percent gains). The 5.3 percent rise to ¥966.0 billion in July 2022 was the largest amount since ¥973.5 billion in June 2019.
Core orders fell 5.0 percent on quarter in the final quarter of 2022, coming in much weaker than the official forecast for a 3.6 percent rebound. It followed a 1.6 percent drop in July-September and an 8.1 percent rise in April-June. The Cabinet Office projected that core orders would rise 4.3 percent in the January-March quarter.
In the fourth-quarter GDP data released Tuesday, business investment in equipment marked its first drop in three quarters, down 0.5 percent on quarter, following solid gains of 1.5 percent in July-September and 2.1 percent in April-June. Capex trimmed the GDP by 0.1 percentage point in the fourth quarter after providing a positive 0.3-point contribution in each of the previous two quarters.
Orders from manufacturers fell 2.1 percent on the month in December for the first rise in four months after falling 9.3 percent in November while those from non-manufacturers in the core measure marked the second straight drop, down 2.5 percent, after a 3.0 percent dip.
The Cabinet Office maintained its assessment after downgrading it last month for November data, saying,"Machinery orders are pausing." The three-month moving average fell 0.6 percent in the October-December period after falling 2.6 percent in September-November.
Core orders dipped 6.6 percent from a year earlier in December after falling 3.7 percent in November, which was the first drop in 20 months, and rising 0.4 percent in October. It was weaker than the median economist forecast of a 5.9 percent drop (forecasts ranged from 7.3 percent to 2.1 percent decreases).
Market Consensus Before Announcement
Japan's core private-sector machinery orders, the key leading indicator of business investment in equipment, are forecast to have posted a modest 2.8 percent rebound on the month in December in reaction to an 8.3 percent plunge in November as capex plans for digitization and green transformation remain solid for fiscal 2022.
Core orders, which exclude volatile orders from electric utilities and for ships, are likely to show a 4.7 percent drop on quarter in the final quarter of 2022, much weaker than the official forecast for a 3.6 percent rebound, after falling 1.6 percent on quarter in July-September and surging 8.1 percent in April-June. Last month, the Cabinet Office maintained its assessment that"the move toward a pickup in machinery orders has paused."
Core orders, which exclude volatile orders from electric utilities and for ships, are likely to show a 4.7 percent drop on quarter in the final quarter of 2022, much weaker than the official forecast for a 3.6 percent rebound, after falling 1.6 percent on quarter in July-September and surging 8.1 percent in April-June. Last month, the Cabinet Office maintained its assessment that"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.
