June Machinery Orders

◆According to statistics for machinery orders in June 2014, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electric power), grew for the first time in three months, up +8.8% m/m, though figures fell below market consensus (+15.3%). Considering the major downturn of the previous two months (-9.1% in April and -19.5% in May), growth is still limited, with machinery orders exhibiting a weak tone.

◆The manufacturing industries achieved growth for the first time in three months at +6.7% m/m. Non-manufacturing orders (excluding shipbuilding and electrical power) grew for the first time in two months by +4.0% m/m.

◆Overseas orders achieved major m/m growth at +62.8%. The growth trend continues due to the recovery in overseas economies.

◆According to the CAO outlook for the Jul-Sep 2014 period, private sector demand (excluding shipbuilding and electrical power) is expected to achieve growth of +2.9% q/q for the first time in two quarters. Growth of +2.5% m/m is thought to be achievable in each of the three months making up the next quarter. On an industry by industry basis, the manufacturing industries are expected to suffer a -0.5% q/q decline, but the non-manufacturing industries are expected to see q/q growth of +2.2%. Though the manufacturing industries are expected to experience a decline, this is seen as being the influence of the steep declines in achievement rates during the Apr-Jun period, and hence should not be seen in an overly negative light.