| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -8.6% | -11.6% to -5.0% | -4.5% | 9.5% |
| Year over Year | 3.0% | -0.6% to 6.8% | 9.8% | 4.5% |
Highlights
Japanese machinery orders, the key leading indicator of business investment in equipment, posted the first drop in three months in reaction to a surge in January as some firms have turned cautious amid slowing global demand, data released Wednesday by the Cabinet Office showed.
But the decline in core private-sector orders was much smaller than expected and they jumped from a year earlier for a second consecutive rise. Capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control.
The Bank of Japan's quarterly Tankan business survey for March released last week showed large firms have solid plans for investment in equipment for fiscal 2023 starting on April 1 while smaller firms projected a rise at the initial stage, which is unusually bullish. Some plans may be carried over from fiscal 2022.
The Econoday Consensus Divergence Index stood at plus 10, 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 15.
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, slipped 4.5 percent from the previous month on a seasonally adjusted basis to ¥888.0 billion in February after surging 9.5 percent to ¥929.6 billion in January. It was firmer than the median economist forecast of an 8.6 percent decline (forecasts ranged from 11.6 percent to 5.0 percent drops). The amount in January was the largest since ¥948.8 billion in July 2022.
After the annual revision, the Cabinet Office last month projected that core orders would rise 2.9 percent on quarter in the January-March quarter, led by a sharp rebound in orders from the manufacturing sector, after slumping 4.7 percent in October-December.
Orders from manufacturers rose 10.2 percent on the month in February after falling 2.6 percent in January and rising 2.5 percent in December while those from non-manufacturers in the core measure dipped 14.7 percent after rebounding 19.5 percent in January and slipping 3.2 percent in December.
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 1.6 percent in the December-February period after rising 0.9 percent in November-January.
Core orders surged 9.8 percent from a year earlier in February for a second straight increase after rising 4.5 percent in January. It was much stronger than the median economist forecast of a 3.0 percent rise (forecasts ranged from a 0.6 percent drop to a 6.8 percent gain).
But the decline in core private-sector orders was much smaller than expected and they jumped from a year earlier for a second consecutive rise. Capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control.
The Bank of Japan's quarterly Tankan business survey for March released last week showed large firms have solid plans for investment in equipment for fiscal 2023 starting on April 1 while smaller firms projected a rise at the initial stage, which is unusually bullish. Some plans may be carried over from fiscal 2022.
The Econoday Consensus Divergence Index stood at plus 10, 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 15.
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, slipped 4.5 percent from the previous month on a seasonally adjusted basis to ¥888.0 billion in February after surging 9.5 percent to ¥929.6 billion in January. It was firmer than the median economist forecast of an 8.6 percent decline (forecasts ranged from 11.6 percent to 5.0 percent drops). The amount in January was the largest since ¥948.8 billion in July 2022.
After the annual revision, the Cabinet Office last month projected that core orders would rise 2.9 percent on quarter in the January-March quarter, led by a sharp rebound in orders from the manufacturing sector, after slumping 4.7 percent in October-December.
Orders from manufacturers rose 10.2 percent on the month in February after falling 2.6 percent in January and rising 2.5 percent in December while those from non-manufacturers in the core measure dipped 14.7 percent after rebounding 19.5 percent in January and slipping 3.2 percent in December.
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 1.6 percent in the December-February period after rising 0.9 percent in November-January.
Core orders surged 9.8 percent from a year earlier in February for a second straight increase after rising 4.5 percent in January. It was much stronger than the median economist forecast of a 3.0 percent rise (forecasts ranged from a 0.6 percent drop to a 6.8 percent gain).
Market Consensus Before Announcement
Japanese machinery orders, the key leading indicator of business investment in equipment, are expected to post the first drop in three months, down 8.6 percent in the core measure, in reaction to a 9.5 percent jump in January as some firms have turned cautious amid slowing global demand.
Capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control. The Bank of Japan's quarterly Tankan business survey for March released last week showed large firms have solid plans for investment in equipment for fiscal 2023 ending March 2024 while smaller firms projected a rise at the initial stage, which is unusually bullish. Some plans may be carried over from fiscal 2022.
Capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control. The Bank of Japan's quarterly Tankan business survey for March released last week showed large firms have solid plans for investment in equipment for fiscal 2023 ending March 2024 while smaller firms projected a rise at the initial stage, which is unusually bullish. Some plans may be carried over from fiscal 2022.
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.
