Manufacturing News

Japan machinery orders on the up as global manufacturing starts to recover

According to Reuters, Japan’s October core machinery orders rose for the first time in three months to beat expectations- a tentative sign of a pickup in capital expenditure.

Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, rose 4.1 per cent in October from the previous month, Cabinet office data showed on Monday.

The results handily beat the economists’ median estimate of a 1.0 per cent increase. ” Machinery orders are basically flat but picking up slightly,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“If this pick up continues, capital expenditure might increase in fiscal 2017,” Minami said, adding that improvement in domestic demand may help boost capital expenditure.

A Japanese Cabinet Office official said machinery orders for Oct-Dec, which manufacturers had previously predicted would decrease 5.9 per cent, may not fall as much as expected because orders improved in October.

However, the official cautioned that orders may not continue to rise steadily. The government maintained its assessment that a slowdown in the pickup of machinery orders can be seen.

At the same time, capital expenditure fell in the July-September quarter for the first time in nearly four years, in a worrying sign that uncertainty over the economic outlook is eroding companies’ confidence.

This result from Japan may be a portent that global manufacturing is beginning to see the end of the long slowdown, as also shown by US results where the manufacturing PMI increased to 53.2 (a five-month high), taking global manufacturing to a 27-month high.

This same story cannot necessarily be said about Australia, where we there was some disappointing Q3 CAPEX data and future investment ‘intentions’ perhaps were not as strong as some had hoped.

While on the whole things are ticking along, the interest markets are not pricing in any major action from the Reserve Bank of Australia (RBA) over the coming 12 months.

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