October Machinery Orders

◆Machinery orders (Cabinet Office [CAO]; private sector excl. those for shipbuilding and from electric utilities) saw the first m/m gain in two months in October (up 0.6%), almost on par with the consensus expectation (up 0.7%).

◆Manufacturing orders saw the first m/m slide in six months (down 0.2%), but this is likely to be temporary and the uptrend continues in general. Non-manufacturing orders (excl. those for shipbuilding and from electric utilities) saw the first gain in two months (up 11.5% m/m).

◆Overseas orders saw the first m/m slide in four months (down 16.0%). However, they posted the third monthly gain in a row on a three-month moving average basis, meaning the underlying uptrend continues.

◆CAO projects the first slide in three quarters for machinery orders in Oct-Dec 2013 (down 2.1% q/q). This projection of negative q/q growth would only transpire if overall orders declined a big 3.0% m/m in both November and December. As a matter of fact, overall orders would still post a positive q/q figure for Oct-Dec even on a decline of 0.9% m/m each month. Hence, we believe a third consecutive quarterly advance in Oct-Dec 2013 is a very likely scenario.