October 2021 Machinery Orders

◆According to statistics for machinery orders in October 2021, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders grew for the first time in three months at +3.8% m/m, while at the same time exceeding market consensus (Bloomberg survey: +1.8%). The Cabinet Office maintained its assessment for machinery orders at “signs of stalling in their recovery.”

◆Manufacturing orders declined for the first time in two months at -15.4% m/m. Looking at performance by industry, orders experienced a reactionary decline in chemical and chemical products, non-ferrous metals, and other industries. On the other hand, non-manufacturing orders (excluding ships and electrical power) achieved growth for the first time in two months at +16.5%. A broad range of industries showed signs of making a comeback, centering on transportation & postal activities, which was helped by large-scale projects (exceeding 10 bil yen). Overseas demand grew for the first time in three months at +17.2%.

◆As for the future of private sector demand (excluding ships and electrical power), performance is expected to experience a moderate recovery. With the state of emergency and other measures having been lifted, domestic growth is expected to shift from manufacturing to non-manufacturing, which will become the new leader in orders. As for manufacturing, capital expenditure in semiconductors in order to keep up with recovery production in motor vehicles is expected to buoy performance. Meanwhile, non-manufacturing is expected to see a comeback in a broad range of industries due to the recovery in consumption of services in the domestic economy.