December Machinery Orders

◆According to statistics for machinery orders in December 2014, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electrical power), were up by +8.3% m/m, while exceeding market consensus as well (+2.3%). Machinery orders experienced a bit of a slowdown in recent months, but strong results for December confirm that a fundamental growth trend is continuing.

◆Looking at results by source of demand, the manufacturing industries won considerable growth for the first time in three months at +24.1% m/m. Non-manufacturing orders (excluding shipbuilding and electric power) grew for the second consecutive month at +7.2% m/m. Considering the weakness of the previous two months, these were not especially strong results. However, it is definitely a sign of recovery and return to a growth trend.

◆According to the CAO outlook for the Jan-Mar 2015 period, private sector demand (excluding shipbuilding and electrical power) is expected to be up by +1.5% q/q, its first growth to be recorded in three quarters. This figure is considered to be achievable even if declines of as much as -2.0% m/m are suffered in each month of the first quarter. Though some foot-dragging was seen in CY2014 Oct-Dec period private sector demand (excluding shipbuilding and electrical power), it has now moved into a moderate growth phase. Considering this fact, the CAO outlook could actually be said to be a bit overly constrained. As will be shown in this report, capex has regained enough territory to head more substantially toward a growth trend. Hence DIR sees private sector demand (excluding shipbuilding and electrical power) showing clear signs of a comeback in the Jan-Mar 2015 period with a growth rate exceeding that reported in the CAO outlook.