Q2 Capex Pointing To Positive GDP Revision, Manufacturing Investment Slowing Though

Q2 Capex in Japan printed a reasonably solid update. Headline capital spending rose 7.4% y/y (against a 10.0% forecast and 6.8% prior). Ex-software spending was slightly above market estimates (9.1%y/y versus 8.3% forecast). Company sales printed 3.5%y/y (against a 4.2% forecast and 2.3% prior), while profits were 13.2%y/y, well ahead of the 6.2% forecast.

• Outside of the company profits outcome, all outcomes saw sequential improvement versus the Q1 outcome.
• The q/q capex, ex software print was 1.9%q/q, which was stronger than the 0.9%q/q rise in business investment reported as part of the Q2 GDP print. Hence today's data is pointing to positive revisions to GDP growth (which are out next Monday)
• In terms of the detail, there was some softness in manufacturing capex. We fell -3.2%q/q after a -3.05 dip in Q1. In y/y terms, manufacturing capex is well off late 2023 highs.
• Non-manufacturing is painting a more upbeat picture, with capex up 3.5%q/q. This also generally reflected in the sales and profit results, although manufacturing sales were still up 2.4% q/q.