November 2021 Machinery Orders

◆According to statistics for machinery orders in November 2021, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders grew for the second consecutive month at +3.4% m/m, while at the same time exceeding market consensus (Bloomberg survey: +1.0%). The Cabinet Office revised its assessment for machinery orders upwards to “signs of picking up.”

◆Manufacturing orders grew for the first time in two months at +12.9% m/m. Looking at performance by industry, major contributions to growth came from electrical machinery, general-purpose and production machinery, and other major industries. On the other hand, non-manufacturing orders (excluding ships and electrical power) suffered a decline for the first time in two months at -0.8%. Transportation & postal activities, which saw large-scale projects exceeding 10 bil. yen during the previous month, pulled overall performance down along with it, though a broad range of other industries actually saw growth. Overseas demand grew for the second consecutive month at +0.7%.

◆As for the future of private sector demand (excluding ships and electrical power), performance is expected to continue marking time. With the rapid spread of the Omicron variant of COVID-19 and the implementation of measures to prevent its further spread, capex is likely to decline centering on service industries associated with moving about and close contact. On the other hand, capex in semiconductors and related industries both in the domestic market and overseas is expected to provide underlying support for the overall economy.