March Machinery Orders

◆According to statistics for machinery orders in March 2014, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electric power), grew for the first time in two months, gaining 19.1% m/m, while considerably outperforming market consensus by +5.8%. The three-month moving average was also up for the first time in two months, indicating that machinery orders have entered a growth trend.

◆As for performance by source of demand, manufacturing industries registered growth for the first time in two months at +23.7%. The three-month moving average was also up for the first time in four months, indicating that the manufacturing industries have entered a growth trend. Non-manufacturing orders (excluding shipbuilding and electrical power) also registered growth for the first time in two months at +8.5% m/m.

◆Overseas orders achieved m/m growth for the fourth consecutive month at +3.2%. According to the CAO outlook for the Apr-Jun period, external demand is expected to continue aggressive performance with +33.5% m/m in gains seen, and the recovery in the world economy is expected to lead the way toward further growth in external demand.

◆According to the CAO outlook for the Apr-Jun 2014 period, private sector demand (excluding shipbuilding and electrical power) is expected to achieve its fifth consecutive period of growth at +0.4%. This figure is seen as being achievable even if month-to-month growth remains modest for each of the months in the period at -4.6%. Therefore, we expect to see a continuation of growth for machinery orders in the Apr-Jun period. Both the manufacturing and non-manufacturing industries show corporate business results as clearly improving, and there is a growing sense that capex in the non-manufacturing industries is deficient. This provides plenty of material to support an increase in capex.