October Machinery Orders

Orders suffer first decline in five months, but on average, upward movement continues

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December 11, 2014

  • Shotaro Kugo

Summary

◆According to statistics for machinery orders in October 2014, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electrical power), were down by -6.4% m/m, as well as falling below market consensus (-1.7%). This was the first decline orders have suffered in five months, but in terms of direction, our conclusion is that orders are headed toward a comeback and that these numbers are not so weak as to suggest an adjustment.


◆Looking at results by source of demand, the manufacturing industries suffered a decline for the first time in two months at -5.5% m/m. However, averaged out, results show that manufacturing is moving toward a comeback. Non-manufacturing orders (excluding shipbuilding and electric power) declined for the first time in three months at -7.5% m/m. On the other hand, many industries achieved growth in m/m terms, giving one the sense that despite the headlines, performance was not nearly as weak as one might think.


◆Overseas demand suffered a decline of -4.6% m/m. This appears to be in reaction to the major growth experienced during the Apr-Jun quarter, revealing a sharp downtrend.


◆According to the CAO outlook for the Oct-Dec 2014 period, private sector demand (excluding shipbuilding and electrical power) is expected to suffer a decline of -0.3% q/q, its first decline in two quarters. In order to achieve these results, average growth of +3.0% m/m must be recorded in November and December. In order for the Oct-Dec 2014 period to report overall growth, the months of November and December will have to record growth of +3.3% m/m. With orders already in a growth trend up to now, these numbers should not be difficult to achieve.

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