March Machinery Orders

◆According to statistics for machinery orders in March 2015, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electrical power), were up by +2.9% m/m, while at the same time exceeding market consensus (+1.5%). Results were favorable, and confirmed that the growth trend is continuing. However, the Apr-Jun period outlook sees a sharp decline, leaving an uneasy aftertaste with this month’s report.

◆Looking at results by source of demand, the manufacturing industries achieved growth for the first time in three months at +0.3% m/m. Meanwhile, non-manufacturing orders (excluding shipbuilding and electric power) grew also for the first time in two months at +4.7% m/m. Growth was experienced in a broad range of industries with strong performance overall.

◆According to the CAO outlook for the Apr-Jun 2015 period, private sector demand (excluding shipbuilding and electrical power) is expected to decline for the first time in four quarters at -7.4% q/q. On an industry by industry basis, performance is expected to take a breather from the recent growth trend, with manufacturing seen declining by -9.4% q/q, and non-manufacturing (excluding shipbuilding and electric power) expected to decline as well at -4.8%. The Apr-Jun period outlook for private sector demand (excluding shipbuilding and electric power) is expected to be achievable even if m/m declines of -4.4% in each month of the period (April, May, and June) are experienced. Moreover, if declines of -0.7% m/m are experienced in each month of the Apr-Jun period, q/q growth can still be reached. Considering the fact that capex related demand is beginning to appear due to the increase in exports, the CAO outlook can be said to be on the weak side.