August Machinery Orders

Orders suffer three consecutive months of decline for first time in six years and three months

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October 08, 2015

  • Keisuke Okamoto
  • Shunsuke Kobayashi

Summary

◆According to statistics for machinery orders in August 2015, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electrical power), were down -5.7% m/m, falling below market consensus as well (+2.3%). This is the first time machinery orders have suffered declines for three consecutive months since the Mar-May period of 2009. Last month the Cabinet Office assessment of machinery orders was “the trend toward a comeback has stalled”. This assessment has now been downgraded to “orders appear to be marking time.” This is the second month in a row that the Cabinet Office has revised its assessment downwards.


◆Looking at orders by source of demand, the manufacturing industries suffered declines for the third consecutive month at -3.2% m/m. The industry peaked out in May after special projects gave it a major boost, but now the downward trend has revealed itself with ever more clarity. Non-manufacturing orders (excluding shipbuilding and electric power) suffered a m/m decline for the second consecutive month at -6.1% m/m. A wide range of industries suffered declines in a continuation of the July trend.


◆According to the CAO outlook for the Jul-Sep 2015 period, private sector demand (excluding shipbuilding and electrical power) is expected to grow by +0.3% q/q. Considering results in July and August, in order to achieve this outlook, September orders will have to achieve growth of +43.5%, which is a nearly impossible goal at this point. Hence machinery orders, which fell below the Apr-Jun period average by -11.3% in July and August, will likely be weak in the Jul-Sep period despite the growth trend experienced up to that time.

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