January Machinery Orders

◆According to statistics for machinery orders in January, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders declined for the first time in two months by -3.2% m/m, while at the same time falling below market consensus at -0.1%. While non-manufacturing (excluding ships and electrical power) made +0.7% m/m in gains, manufacturing suffered a major decline of -10.8%, bringing down overall results.

◆Looking at orders by source of demand in January, the manufacturing industries declined for the first time in four months at -10.8% m/m. Our evaluation is that on average, manufacturing is marking time. Non-manufacturing orders (excluding ships and electric power) grew for the second consecutive month at +0.7% m/m. The trend for orders in non-manufacturing maintains a relatively high level, but as of this point in time, performance continues to experience ups and downs.

◆Machinery orders, the leading indicator for capex, are expected to gradually expand in the future. Positive factors providing underlying support for machinery orders include the high level of recurring profits and investments in rationalization and labor-saving devices due to the fact that supply and demand for labor remains tight. The sense of a shortage in production facilities is growing stronger as the manufacturing industry experiences an expansion in exports due to the recovery in the world economy. Meanwhile, the non-manufacturing industries are expected to carry out investments in transport and distribution infrastructure.