November 2022 Machinery Orders

◆According to statistics for machinery orders in November 2022, the leading indicator for domestic capex and private sector demand (excluding ships and electrical power), orders shifted into a decline for the first time in two months at -8.3% m/m, falling significantly below market consensus (Bloomberg survey: -1.0%). The major factor behind the decline was shrinking overseas demand, which led to a decline in orders from the manufacturing industry. The Cabinet Office has therefore revised its assessment for machinery orders downward to “stalling.”

◆Manufacturing orders suffered a decline for the third consecutive month at -9.3% m/m. Electrical machinery, one of major export industries, pulled overall performance down with a decline of -32.7%. Meanwhile, non-manufacturing orders (excluding ships and electrical power), suffered a decline for the first time in three months at -3.0%. However, the main factor behind the decline was a reactionary decline experienced by information services (-27.6%) after the major growth registered in the previous month. A wide range of other industries actually experienced major growth, hence the non-manufacturing industries overall are achieving favorable performance.

◆As for the future of private sector demand (excluding ships and electrical power), a shift into a moderate growth trend is expected. There is still much room for recovery in domestic consumption of services, hence growth in capex is seen in the non-manufacturing industries. On the other hand, orders may decline further for manufacturing centered on export-oriented industries, due to the economic downturn in the US and Europe.