August 2023 Machinery Orders

◆According to statistics for machinery orders in August 2023, the leading indicator for domestic capex and private sector demand (excluding ships and electric power), orders declined for the second consecutive month by -0.5% m/m. Manufacturing grew for the first time in two months at +2.2%, while non-manufacturing (excluding ships and electric power) suffered a decline for the first time in three months at -3.8%. The Cabinet Office has left its assessment for machinery orders unchanged at “stalling.”

◆Manufacturing saw overall performance buoyed by major growth in chemical and chemical products. Meanwhile, non-manufacturing orders (excluding ships and electric power), recorded limited growth in a wide range of industries, but finance and insurance suffered a major decline, driving down overall performance.

◆As for the future of private sector demand (excluding ships and electric power), on average the move toward moderate growth is expected to continue. Capex is likely to increase centering on the non-manufacturing industries backed by the recovery in consumption of domestic services. However, caution must be exercised with the prolonged monetary tightening in the US and Europe, and the real estate slump in China, as well as other factors which could dampen overseas demand and reduce the appetite for capex by domestic companies, particularly in the manufacturing sector.