December 2021 Machinery Orders

◆According to statistics for machinery orders in December 2021, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders grew for the third consecutive month at +3.6% m/m, contrary to market consensus (Bloomberg survey: -2.0%). The Cabinet Office revised its assessment for machinery orders upwards to “picking up.”

◆Manufacturing orders grew for the second consecutive month at +8.0% m/m. Looking at performance by industry, growth was led by non-ferrous metals, chemical and chemical products, and electrical machinery. On the other hand, non-manufacturing orders (excluding ships and electrical power) suffered a slight decline for the second consecutive month at -0.1%. Information services and finance & insurance, which had continued exhibiting growth up to now, suffered declines. Overseas demand fell for the first time in three months at -3.5%.

◆As for the future of private sector demand (excluding ships and electrical power), performance is expected to mark time. The Omicron variant of COVID-19 has continued to spread in domestic Japan, and corporate willingness to spend on capex is very likely to decline centering on service industries associated with moving about and close contact. In addition, the tendency to refrain from capex may become more manifest in response to production cuts in motor vehicles, electrical machinery and other industries due to the continued semiconductor shortage.