| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Month over Month | 1.5% | -0.5% to 3.0% | 9.5% | 1.6% | 0.3% |
| Year over Year | -3.4% | -6.9% to -2.7% | 4.5% | -6.6% |
Highlights
Japanese machinery orders, the key leading indicator of business investment in equipment, jumped for a second straight monthly gain in January, after a modest gain and a plunge in November, amid a widespread digitization drive and prospects for further reopening of the economy without strict anti-Covid public health rules, data released Thursday by the Cabinet Office showed.
Looking back at fourth-quarter GDP, business investment in equipment marked its first drop in three quarters, down 0.5 percent on quarter, following a solid 1.5 percent gain in July-September. Capex trimmed the GDP by 0.1 percentage point in October-December after providing a positive 0.3-point contribution in the previous quarter.
Despite the recent pullback, business investment is generally supported by demand for automation, government-led digital transformation and emission control.
The Econoday Consensus Divergence Index stood at plus 18, above zero, which indicates the Japanese economy is performing better than expected after outperforming earlier. Excluding the impact of inflation, the index was at plus 34.
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 with sustainable wage growth.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, surged 9.5 percent from the previous month on a seasonally adjusted basis to ¥929.6 billion in January after rising 0.3 percent (revised down from a 1.6 percent gain) to ¥848.9 billion (revised from ¥851.9 billion) in December and slumping 6.7 percent (revised up from an 8.3 percent fall) in November. It was stronger than the median economist forecast of a 1.5 percent rise (forecasts ranged from a 0.5 percent drop to a 3.0 percent gain). The amount in January was the largest since a downwardly revised ¥948.8 billion in July 2022.
The Cabinet Office conducted an annual update on seasonal adjustments, resulting in some sharp revisions to past figures.
Machinery orders made a solid start to the first quarter of 2023. After the annual revision, the Cabinet Office now projects that core orders will rise 2.9 percent on quarter (revised down from last month's forecast of a 4.3 percent increase) in the January-March quarter, led by a sharp rebound in orders from the manufacturing sector, after slumping 4.7 percent (revised up from a 5.0 percent drop) in October-December.
Core orders would rise 2.9 percent even if they fell 4.0 percent on the month in each of February and March. If core orders were unchanged for the rest of the quarter, they would rise 7.1 percent in January-March.
Orders from manufacturers fell 2.6 percent on the month in January for the first rise in two months after rising 2.5 percent (revised up from a 2.1 percent fall) in December while those from non-manufacturers in the core measure marked the first rise in third months, up 19.5 percent, after falling 3.2 percent (revised down from a 2.5 percent dip).
The increase in core orders in January was led by high demand for computers from transport and financial firms amid digital transformation as well as demand for construction equipment from contractors. Those gains offset a pullback in orders from non-ferrous metal producers after a gain in December. Orders from electric machine makers and the auto industry remain on a downtrend.
The Cabinet Office maintained its assessment after downgrading it in January for November data, saying,"Machinery orders are pausing." The three-month moving average rose 0.9 percent in the November-January period after falling 1.0 percent in October-December.
Core orders rebounded 4.5 percent from a year earlier in January after falling 6.6 percent in December and 3.7 percent in November, which was the first drop in 20 months. It was stronger than the median economist forecast of a 3.4 percent drop (forecasts ranged from 6.9 percent to 2.7 decreases).
Looking back at fourth-quarter GDP, business investment in equipment marked its first drop in three quarters, down 0.5 percent on quarter, following a solid 1.5 percent gain in July-September. Capex trimmed the GDP by 0.1 percentage point in October-December after providing a positive 0.3-point contribution in the previous quarter.
Despite the recent pullback, business investment is generally supported by demand for automation, government-led digital transformation and emission control.
The Econoday Consensus Divergence Index stood at plus 18, above zero, which indicates the Japanese economy is performing better than expected after outperforming earlier. Excluding the impact of inflation, the index was at plus 34.
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 with sustainable wage growth.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, surged 9.5 percent from the previous month on a seasonally adjusted basis to ¥929.6 billion in January after rising 0.3 percent (revised down from a 1.6 percent gain) to ¥848.9 billion (revised from ¥851.9 billion) in December and slumping 6.7 percent (revised up from an 8.3 percent fall) in November. It was stronger than the median economist forecast of a 1.5 percent rise (forecasts ranged from a 0.5 percent drop to a 3.0 percent gain). The amount in January was the largest since a downwardly revised ¥948.8 billion in July 2022.
The Cabinet Office conducted an annual update on seasonal adjustments, resulting in some sharp revisions to past figures.
Machinery orders made a solid start to the first quarter of 2023. After the annual revision, the Cabinet Office now projects that core orders will rise 2.9 percent on quarter (revised down from last month's forecast of a 4.3 percent increase) in the January-March quarter, led by a sharp rebound in orders from the manufacturing sector, after slumping 4.7 percent (revised up from a 5.0 percent drop) in October-December.
Core orders would rise 2.9 percent even if they fell 4.0 percent on the month in each of February and March. If core orders were unchanged for the rest of the quarter, they would rise 7.1 percent in January-March.
Orders from manufacturers fell 2.6 percent on the month in January for the first rise in two months after rising 2.5 percent (revised up from a 2.1 percent fall) in December while those from non-manufacturers in the core measure marked the first rise in third months, up 19.5 percent, after falling 3.2 percent (revised down from a 2.5 percent dip).
The increase in core orders in January was led by high demand for computers from transport and financial firms amid digital transformation as well as demand for construction equipment from contractors. Those gains offset a pullback in orders from non-ferrous metal producers after a gain in December. Orders from electric machine makers and the auto industry remain on a downtrend.
The Cabinet Office maintained its assessment after downgrading it in January for November data, saying,"Machinery orders are pausing." The three-month moving average rose 0.9 percent in the November-January period after falling 1.0 percent in October-December.
Core orders rebounded 4.5 percent from a year earlier in January after falling 6.6 percent in December and 3.7 percent in November, which was the first drop in 20 months. It was stronger than the median economist forecast of a 3.4 percent drop (forecasts ranged from 6.9 percent to 2.7 decreases).
Market Consensus Before Announcement
Japanese machinery orders, the leading indicator of business investment in equipment, are forecast to post a second straight monthly gain, up 1.5 percent in January after a 1.6 percent rebound in December and an 8.3 percent plunge in November, amid prospects for further reopening of the economy without strict anti-Covid public health rules. Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, are seen down 3.4 percent on year after falling 6.6 percent in December and 3.7 percent in November, which was the first drop in 20 months.
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.
