November Machinery Orders

◆According to statistics for machinery orders in November, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders grew by +5.7% m/m, registering growth for the second consecutive month contrary to market consensus (-1.4%). Manufacturing suffered a minor decline of -0.2%, while non-manufacturing grew by +9.8%, leading overall performance.

◆Although manufacturing orders fell in November, a high level was still maintained due to expanding exports associated with recovery in the global economy. Non-manufacturing grew in November, but on average is actually in a declining trend.

◆Machinery orders, the leading indicator for capex, are expected to experience ups and downs in the future. Investment in maintenance & repair looks promising in the manufacturing industry with expanding exports backed by the recovery in the global economy, but willingness to invest in capacity increase is not strong. In order for capex spending to become full-fledged, operating rates must grow more. On the other hand, the non-manufacturing industry is expected to carry out investments in transport and distribution infrastructure with the continuing growth in foreign visitors to Japan, but caution is advised regarding the weakening growth trend in housing starts and public investment.