| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -0.9% | -2.5% to 5.9% | -1.1% | 2.7% |
| Year over Year | -10.7% | -12.2% to -4.7% | -13.0% | -5.8% |
Highlights
Japanese core machinery orders, the key leading indicator of business investment in equipment, posted a slight pullback on the month in July, as largely expected, after rebounding in June and slumping in May, amid sluggish demand for computers from many industries including electric equipment and auto makers, data released Thursday by the Cabinet Office showed.
Core orders marked their fifth straight decline from a year earlier, with the pace of decline accelerating from June.
For fiscal 2023 that began in April, capital investment is generally supported by demand for automation amid labor shortages as well as government-led digitization and emission control, but revised April-June GDP data released last week showed capex marked the first drop in two quarters amid uncertainty over global growth.
Econoday's Relative Performance Index (RPI) stood at minus 44, far below zero, which indicates the Japanese economy is performing much worse than expected. Excluding the impact of inflation, the RPI was at minus 50.
Japanese policymakers believe the economy needs continued monetary easing and fiscal spending to help achieve stable 2 percent inflation with sustainable wage growth.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, fell 1.1 percent from the previous month on a seasonally adjusted basis to ¥844.8 billion in July after rising 2.7 percent to ¥854.0 billion in June and plunging 7.6 percent to ¥831.5 billion in May, which was the lowest amount since ¥825.2 billion in February 2022. The decrease in July was slightly larger than the median economist forecast of a 0.9 percent decline (forecasts ranged from a 2.5 percent drop to a 5.9 percent gain).
Last month, the Cabinet Office projected that core orders would dip a further 2.6 percent in the July-September quarter, led by declines in orders from both the manufacturing and non-manufacturing sectors, after falling 3.2 percent in the previous quarter.
Orders from manufacturers dipped 5.3 percent on the month in July for the first drop in three months after rising 1.6 percent in June, while those from non-manufacturers in the core measure rose 1.3 percent for the second straight month after surging 9.8 percent the previous month.
The decrease in core orders in July was led by lower demand for computers from electric machinery makers, the auto industry and chemical product makers as well as the financial and insurance industries. Higher orders came from pulp and paper manufacturers for boilers and turbines, and from the construction industry for cranes and tractors.
The Cabinet Office maintained its assessment after downgrading it in January for November data, saying,"Machinery orders are pausing." The three-month moving average fell back 2.1 percent in the May-July period after being unchanged in April-June and falling 2.1 percent in March-May.
Core orders plunged 13.0 percent from a year earlier in July, partly in reaction to a sharp 12.8 percent increase marked in July 2022. It followed decreases of 5.8 percent in June, 8.7 percent in May, 5.9 percent in April and 3.5 percent in March and a 9.8 percent jump in February. It was weaker than the median economist forecast of a 10.7 percent drop. Forecasts ranged from 12.2 percent to 4.7 percent falls.
Core orders marked their fifth straight decline from a year earlier, with the pace of decline accelerating from June.
For fiscal 2023 that began in April, capital investment is generally supported by demand for automation amid labor shortages as well as government-led digitization and emission control, but revised April-June GDP data released last week showed capex marked the first drop in two quarters amid uncertainty over global growth.
Econoday's Relative Performance Index (RPI) stood at minus 44, far below zero, which indicates the Japanese economy is performing much worse than expected. Excluding the impact of inflation, the RPI was at minus 50.
Japanese policymakers believe the economy needs continued monetary easing and fiscal spending to help achieve stable 2 percent inflation with sustainable wage growth.
Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, fell 1.1 percent from the previous month on a seasonally adjusted basis to ¥844.8 billion in July after rising 2.7 percent to ¥854.0 billion in June and plunging 7.6 percent to ¥831.5 billion in May, which was the lowest amount since ¥825.2 billion in February 2022. The decrease in July was slightly larger than the median economist forecast of a 0.9 percent decline (forecasts ranged from a 2.5 percent drop to a 5.9 percent gain).
Last month, the Cabinet Office projected that core orders would dip a further 2.6 percent in the July-September quarter, led by declines in orders from both the manufacturing and non-manufacturing sectors, after falling 3.2 percent in the previous quarter.
Orders from manufacturers dipped 5.3 percent on the month in July for the first drop in three months after rising 1.6 percent in June, while those from non-manufacturers in the core measure rose 1.3 percent for the second straight month after surging 9.8 percent the previous month.
The decrease in core orders in July was led by lower demand for computers from electric machinery makers, the auto industry and chemical product makers as well as the financial and insurance industries. Higher orders came from pulp and paper manufacturers for boilers and turbines, and from the construction industry for cranes and tractors.
The Cabinet Office maintained its assessment after downgrading it in January for November data, saying,"Machinery orders are pausing." The three-month moving average fell back 2.1 percent in the May-July period after being unchanged in April-June and falling 2.1 percent in March-May.
Core orders plunged 13.0 percent from a year earlier in July, partly in reaction to a sharp 12.8 percent increase marked in July 2022. It followed decreases of 5.8 percent in June, 8.7 percent in May, 5.9 percent in April and 3.5 percent in March and a 9.8 percent jump in February. It was weaker than the median economist forecast of a 10.7 percent drop. Forecasts ranged from 12.2 percent to 4.7 percent falls.
Market Consensus Before Announcement
Japanese core machinery orders, the key leading indicator of business investment in equipment, are forecast to have slipped 0.9 percent on the month in July (some forecasters expect a rise) after rebounding 2.7 percent in June and slumping 7.6 percent in May. Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, are expected to plunge 10.7 percent on the year after falling 5.8 percent in June for a fifth straight drop. Last month, the Cabinet Office maintained its assessment, saying,"Machinery orders are pausing."
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.
