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February 2021 Machinery Orders

Recovery experiences a lull in both the manufacturing and non-manufacturing industries

Wakaba Kobayashi

Summary

◆According to statistics for machinery orders in February 2021, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders declined significantly at -8.5% m/m against the expectations for growth on the part of market consensus, which recorded +2.5%. Both the manufacturing and non-manufacturing industries declined for the second consecutive month.

◆Looking at performance by industry, manufacturing orders declined by -5.5% m/m. Order amounts declined for non-ferrous metals, ship building, and foods & beverages. Meanwhile, non-manufacturing orders (excluding ships and electrical power) also suffered a decline at -10.9%. A wide range of industries suffered declines, including other non-manufacturing (which encompasses accommodations and food services), agriculture, forestry & fishing, and construction. Other non-manufacturing suffered a decline for the second consecutive month due to the effects of the extended state of emergency.

◆Overseas demand achieved major growth at +76.2% m/m. The amount in orders received was at its highest since this statistic first began. Chemical machinery brought a major contribution to overall growth with large-scale orders (exceeding 10 bil yen).

◆As for the future of private sector demand (excluding ships and electrical power), a shift into a moderate recovery phase is expected. Exports are expected to experience growth centering on the US and China, whose economies are seen achieving a favorable recovery, and this in turn is expected to increase the willingness of corporations to engage in capex. On the other hand, priority measures to keep the spread of COVID-19 in check were implemented in some regions from April. This is expected to cause a decline in orders in accommodations and food services, which will bring downward pressure on overall results. However, the impact is expected to be minor for private sector demand overall.

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