MNI DATA ANALYSIS: Japan Nov Machine Orders Show Solid Capex

--MNI: Japan Nov Core Machine Orders +5.7% M/M; MNI Median -1.2% 

--Japan Nov Core Machine Orders Post 2nd Straight M/M Rise

--Japan Govt Keeps View: Machine Orders Show Signs of Pickup

By Max Sato

     TOKYO (MNI) - Japanese machinery orders unexpectedly posted a second

straight month-on-month rise in November, indicating continued solid demand for

business investment in early 2018, but officials said Wednesday that the recent

flat to slight uptrend in orders is not strong enough for the government upgrade

its view.

     The November gain was led by a large one-off order from wholesalers for

cranes and conveyers and a rebound in orders from construction firms, suggesting

companies are trying to make their operations more efficient amid serious labor

shortages in some sectors.

     Demand for industrial robots remain strong, official said. 

     --CORE ORDERS 9-YEAR HIGH

     Core private-sector machinery orders, which exclude volatile orders for

power generation equipment and ships, rose 5.7% on month in November after

rising 5.0% in October and falling 8.1% in September.

     The November rise was stronger than the MNI survey median forecast for a

1.2% drop (forecast range: -4.7% to +3.9%) and was the highest increase since

+8.0% in July 2017.

     The level of core machinery orders at Y899.2 billion in November was the

highest since Y931.9 billion in June 2008.

     The consecutive rise in the leading indicator of capital investment raised

the possibility that core orders might have increased in the October-December

quarter, instead of falling 3.5% on quarter as projected by the Cabinet Office

earlier.

     If core orders were unchanged on month in December, it would mark a 4.1%

rise in Q4. and if they fell 11.4%, Q4 results would be flat.

     --GOVT KEEPS VIEW ON PICKUP

     But officials remain cautious as machinery orders tend to fluctuate widely

from month to month.

     "The three-month moving average rose only 0.7% in the September-November

period, which is not strong enough for us to revise up our view," a Cabinet

Office official told MNI.

     Based on the November data, the Cabinet Office maintained its assessment,

saying "Machinery orders are showing signs of a pickup."

     The three-month moving average of core orders was essentially flat in

October, down 0.1%, from the July-September period, when it rose 0.8%, which was

a third straight rise.

     Core orders from the manufacturing sector dipped 0.2% on month in November,

the first drop in two months in payback for a 7.4% gain in October, while those

from the non-manufacturing sector jumped 9.8%, the second straight rise after

+1.1% in October.

     Orders from the non-manufacturing sector had been lackluster in recent

months. But orders from the construction industry rebounded in November after

showing a pullback. Many orders had been placed before higher emission control

took effect in September.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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