July 2021 Machinery Orders

◆According to statistics for machinery orders in July 2021, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders grew for the first time in two months at +0.9% m/m, but did not reach the level of market consensus. There was a sharp disparity between the favorable manufacturing industries and the non-manufacturing industries, which were lagging in recovery.

◆Looking at performance by industry, manufacturing orders continued in a favorable recovery, growing for the fourth consecutive month at +6.7% m/m. Orders grew for electrical machinery, ship building, automobiles, parts and accessories. On the other hand, non-manufacturing orders (excluding ships and electrical power) declined for the first time in three months by -9.5%. Construction, transportation & postal activities, as well as wholesale and retail trade, which had large-scale projects (exceeding 10 bil yen) during the previous month, all suffered declines. Overseas demand grew for the first time in two months at +24.1% in a continuation of its dynamic growth trend.

◆As for the future of private sector demand (excluding ships and electrical power), recovery will likely continue. As for manufacturing orders, exports to the US and Europe are expected to continue providing underlying support. Meanwhile, non-manufacturing orders are expected to pick up the pace of recovery benefitting from the current trend toward economic normalization, with investment in transportation & postal activities, aircraft and rolling machines, and other areas which had been postponed, expected to resume. However, it should be noted that there is still a risk of downturn depending on the status of COVID-19 infections.