MNI SOURCE: Japan Oct Machine Orders Show Modest Capex Rise

By Max Sato

     TOKYO (MNI) - Japanese machinery orders on average have been flat with a

solid undertone, led by the manufacturing sector, indicating a modest rise in

business investment in equipment, a Japanese government official told MNI

Wednesday.

     The stronger-than-expected data raise the possibility that orders may not

fall in the fourth quarter, as the government had previously predicted.

Additional data on companies' capex plans will be released Friday in the Bank of

Japan's quarterly Tankan survey for December. 

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

power generation equipment and ships, rebounded 5.0% on month in October, after

falling 8.1% in September. The October rise was stronger than the MNI survey

median forecast for a 3.0% gain.

     Core orders from the manufacturing sector rose 7.4% on month to a level

last seen in January 2016, while those from the non-manufacturing sector edged

up 1.1%. 

     "In recent months, orders from the manufacturing sector have been strong

without any special factors such as one-off large orders. The levels of orders

from manufacturers of general machinery, automobiles and electric machines have

been high," an official at the Cabinet Office told MNI, adding it reflects the

sustained, modest economic recovery.

     "However, orders from the non-manufacturing sector have been lackluster.

The upward effect of past orders for rail cars has faded and orders from the

construction industry are showing a pullback as many orders had been placed

before higher emission control took effect in September," the official said. 

     --GOVERNMENT MAINTAINS ASSESSMENT 

     Based on the October 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.

     "But core orders rose 5.0% on the month in October, so we are maintaining

our assessment. The trend has not changed," the official said.

     Last month the Cabinet Office projected that core orders would fall 3.5% on

quarter in October-December, which would be the first q/q drop in two quarters

after +4.7% in July-September.

     Core orders could meet the forecast if they fell 3.8% on month in each of

November and December. If core orders were unchanged in each of those months,

they would rise 0.3% in Q4.

     Data released last week showed Q3 real gross domestic product was revised

up sharply to +0.6% on quarter, or an annualized +2.5%, from the preliminary

estimate of +0.3% on quarter, or an annualized 1.4%. It was based on the annual

benchmark revision of GDP.

     The main theme in the July-September quarter remained unchanged from the

preliminary estimate -- a rebound in net exports offset a slump in consumer

spending caused by bad weather.

     Business investment was revised up to +1.1% on quarter, or an annualized

+4.3%, from the initial reading of +0.2% on quarter, or an annualized +1.0%. It

was the fourth consecutive quarter-on-quarter rise. Its contribution to overall

growth was revised up to +0.2 percentage point from the preliminary estimate of

+0.0 percentage point. It followed a contribution of +0.2 percentage point in

Q2.

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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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