| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | 0.7% | -0.5% to 3.0% | -3.2% | -2.9% |
| Year over Year | 7.1% | 3.9% to 8.7% | 10.8% | 0.7% |
Highlights
Japanese core machinery orders, the key leading indicator of business investment in equipment, unexpectedly posted a second straight drop in May, down 3.2 percent on the month, on a pullback for computers from the communications and financial industries though overall demand for digitizing operations remains strong.
The indicator, which tends to fluctuate sharply from month to month, came in much weaker than the median economist forecast of a 0.7 percent increase (forecasts ranged from a 0.5 percent drop to a 3.0 percent rise) and followed a 2.9 percent drop in April, which was the first decrease in three months. The three-month moving average of core orders fell 1.1 percent in the March-May period after rising 2.4 percent in February-April.
As a result, the Cabinet Office downgraded its assessment for the first time in four months and only two months after upgrading it, saying,"The pickup in machinery orders is pausing." Last month, it said,"Machinery orders are showing signs of a pickup."
However, companies in general have solid plans for investing in automation amid labor shortages and in digitization and emission control. The Bank of Japan's quarterly Tankan survey for June released last week showed firms revised up their capital investment plans for fiscal 2024 that began in April.
Orders from manufacturers rose 1.0 percent on the month in May after slumping 11.3 percent in April and soaring 19.4 percent in March, led by those for computers and X-ray equipment from electric machine makers as well as for cranes and conveyors from producers of information communications equipment. Orders from non-manufacturers fell 7.5 percent after rebounding 5.9 percent in April and dipping 11.3 percent in March due to declines in orders for communications equipment and computers from telecommunications firms and those for boilers and turbines from the real-estate industry.
Core machinery orders, which track the private sector and exclude volatile orders from electric utilities and for ships, showed a third straight year-over-year increase, up 10.8 percent, after increases of 0.7 percent in April and 2.7 percent in March, which was the first rise in 13 months. It was higher than the consensus forecast of a 7.1 percent increase.
In May, the Cabinet Office forecast that core orders were likely to slip back 1.6 percent in the April-June quarter for the first drop in two quarters, which are expected to be pulled down by both the manufacturing and non-manufacturing sectors in payback for recent gains. In order for core orders to meet the official projection, they must not fall more than 2.4 percent on the month in June.
Econoday's Relative Performance Index (RPI) stands at minus 10, below zero, which indicates the Japanese economy is performing slightly weaker than expected. Excluding the impact of inflation, the RPI is at minus 22.
The indicator, which tends to fluctuate sharply from month to month, came in much weaker than the median economist forecast of a 0.7 percent increase (forecasts ranged from a 0.5 percent drop to a 3.0 percent rise) and followed a 2.9 percent drop in April, which was the first decrease in three months. The three-month moving average of core orders fell 1.1 percent in the March-May period after rising 2.4 percent in February-April.
As a result, the Cabinet Office downgraded its assessment for the first time in four months and only two months after upgrading it, saying,"The pickup in machinery orders is pausing." Last month, it said,"Machinery orders are showing signs of a pickup."
However, companies in general have solid plans for investing in automation amid labor shortages and in digitization and emission control. The Bank of Japan's quarterly Tankan survey for June released last week showed firms revised up their capital investment plans for fiscal 2024 that began in April.
Orders from manufacturers rose 1.0 percent on the month in May after slumping 11.3 percent in April and soaring 19.4 percent in March, led by those for computers and X-ray equipment from electric machine makers as well as for cranes and conveyors from producers of information communications equipment. Orders from non-manufacturers fell 7.5 percent after rebounding 5.9 percent in April and dipping 11.3 percent in March due to declines in orders for communications equipment and computers from telecommunications firms and those for boilers and turbines from the real-estate industry.
Core machinery orders, which track the private sector and exclude volatile orders from electric utilities and for ships, showed a third straight year-over-year increase, up 10.8 percent, after increases of 0.7 percent in April and 2.7 percent in March, which was the first rise in 13 months. It was higher than the consensus forecast of a 7.1 percent increase.
In May, the Cabinet Office forecast that core orders were likely to slip back 1.6 percent in the April-June quarter for the first drop in two quarters, which are expected to be pulled down by both the manufacturing and non-manufacturing sectors in payback for recent gains. In order for core orders to meet the official projection, they must not fall more than 2.4 percent on the month in June.
Econoday's Relative Performance Index (RPI) stands at minus 10, below zero, which indicates the Japanese economy is performing slightly weaker than expected. Excluding the impact of inflation, the RPI is at minus 22.
Market Consensus Before Announcement
Japanese core machinery orders, the key leading indicator of business investment in equipment, are forecast to show a modest 0.7 percent rebound on the month in May amid constant demand for computers from many industries, after posting their first drop in three months in April, down 2.9% in payback for sharp gains made earlier.
Core machinery orders, which track the private sector and exclude volatile orders from electric utilities and for ships, are expected to jump 7.1 percent on the year in May for a third straight increase after a 0.7 percent rise in April. The Bank of Japan's quarterly Tankan survey for June showed firms revised up their capital investment plans for fiscal 2024 that began in April. Last month, the Cabinet Office maintained its view after upgrading it in the March report, saying,"Machinery orders are showing signs of a pickup."
Core machinery orders, which track the private sector and exclude volatile orders from electric utilities and for ships, are expected to jump 7.1 percent on the year in May for a third straight increase after a 0.7 percent rise in April. The Bank of Japan's quarterly Tankan survey for June showed firms revised up their capital investment plans for fiscal 2024 that began in April. Last month, the Cabinet Office maintained its view after upgrading it in the March report, saying,"Machinery orders are showing signs of a pickup."
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.
