October Machinery Orders

◆According to statistics for machinery orders in October 2015, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electrical power), were up for the second consecutive month at +10.7% m/m, while considerably exceeding market consensus (-1.5%). Results were also on the high side from the viewpoint of the 3-month moving average, leaving us to conclude that machinery orders hit bottom during the summer and are now back into a growth phase.

◆Looking at orders by source of demand in October, the manufacturing industries achieved growth for the first time in five months at +14.5% m/m. It appears that the declines, which the manufacturing industry suffered after peaking out in May when special projects gave it a major boost, have come to a stop. Meanwhile, non-manufacturing orders (excluding shipbuilding and electric power) grew for the second consecutive month at +10.7% m/m.

◆Machinery orders are expected to continue marking time in the near future. Improvement in corporate earnings in association with cheap crude oil which has continued since last summer is expected to provide underlying support for corporations’ willingness to spend on capex. The non-manufacturing industries, which are relatively free of influence from the sluggish overseas economy, are getting underlying support from favorable domestic demand, and are expected to carry out investment in energy saving and labor saving as a means of dealing with the shortage of manpower.