January Machinery Orders

Plunge in domestic/foreign demand vs. bright signs by industry

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  • Tsutomu Saito

Summary

◆Machinery orders (Cabinet Office [CAO]; private sector excl. those for shipbuilding and from electric utilities; this basis hereafter unless otherwise specified; leading indicator of domestic capex) posted the first m/m slide in four months (down 13.1%), substantially short of consensus expectations (down 1.7%). On a three-month moving average basis, orders saw the first slide in three months. However, given some bright notes among many industries, January figures should be seen as a one-off plunge amid a modest underlying recovery trend.


◆By demand source, manufacturing orders posted the first m/m slide in three months (down 13.2%) and non-manufacturing orders the second consecutive m/m slide (down 6.3%). A closer look, however, reveals that orders from many industries posted increases. Thus, the underling trend should not be seen as stagnating, as indicated by overall machinery orders, and the January result reflects one-off volatility.


◆Corporate earnings, centering on manufacturers, have improved, reflecting the recent weakness in the yen. Meanwhile, industrial production has been on an uptrend since November 2012. Thus, capex will very likely move toward an uptrend, albeit possibly stagnating for a while due to an expected slide in machinery orders in Jan-Mar 2013.

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