March Machinery Orders

Projection for higher manufacturing orders a signal for capex advance?

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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) posted the second consecutive m/m gain in March (up 14.2%), substantially overshooting consensus expectations (up 3.5%).


◆By demand source, manufacturing orders posted the second consecutive m/m gain (up 13.3%) and non-manufacturing orders also posted the second consecutive m/m gain (up 14.3%). A rise was seen for orders from assembling industries, and those from the construction industry continued to advance, thanks to increased public works projects, pushing up overall machinery orders.


◆Overseas orders posted the second consecutive m/m gain (up 52.1%). While the boost could be a result of one-off large-scale orders, we believe overseas orders have been on a moderate uptrend.


◆CAO projects that machinery orders will decline 1.5% q/q in Apr-Jun 2013 for the fifth consecutive quarter. However, manufacturing orders are projected to increase for the first time in seven quarters (up 0.8%), indicating that corporate stance may change to a positive direction on capex, centering on export industries. Indeed, exports increased, earnings improved, and domestic demand recovered steadily, meaning the capex environment has already begun to improve, which will, in turn, lead to a steady recovery in domestic and foreign demand. As such, machinery orders will likely gradually move toward an uptrend in mid-2013 and beyond.

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