Japan Core Private Machinery Orders Firmer But Outlook Troubling

Japanese core private-sector machinery orders rose sharply and unexpectedly in March but the key measure of corporate spending pointed to a slowdown ahead, official figures showed May 13. The Cabinet Office said core private sector orders in March rose 1.9% from February, confounding expectations for a fall of 0.9 % drop. Year-on-year, core orders increased 13.2% in March.

However, going forward, the government said orders would fall 3.1% in the second quarter compared with the three months to March, clouding growth prospects for the world's second-largest economy. Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, are viewed as a leading indicator of corporate capital spending.

"Although the headline figure seems robust, it is because of the change (in March) in the method of calculating seasonal factors," said Taro Saito, senior economist at NIL Research Institute. "The figure for the January-March quarter tells you that machinery orders were almost flat while the forecast for the April-June quarter is weak, which is worrisome," he said.

In the January-March quarter, core private-sector machinery orders rose 0.7% from the three months to December. For March alone, orders placed by the manufacturing sector rose 2.1 % month-on-month and 16.1% from a year earlier while orders from non-manufacturers increased 1.3 % and 10.7%, respectively.

Copyright Agence France-Presse, 2005

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