Core machinery orders in Japan rose by 8.3% in June 2016

The core machinery orders in Japan rose by 8.3% in June 2016, signaling for recovery of capital investments. The growth in orders, which is considered as highly volatile as an indicator of capital spending in the next six to nine months, is greater than the average analyst estimate for an increase of 3.1%. This is the first increase since March, as orders from manufacturers were growing with 17.7%, while those from non-manufacturing sector increased by 2.1%.

On an annual basis the main machinery orders in Japan, which exclude those ships and electricity, decreased by 0.9% in June 2016, compared with the median forecast for an annual decline of 4.2%. In May, the annual decline was 11.7%.

The survey reflects the level of orders for the production of machinery and equipment, showing the direction of development of the economy through an early study of trends in investment in equipment. Manufacturers forecast that core orders will rise 5.2% in July-September after falling 9.2% in the previous quarter.

The orders are likely to be supported by infrastructure demand for the 2020 Tokyo Olympics and inbound tourist demand. But they are expected to lack strength due to the negative impact of the yen’s appreciation and weak private consumption.

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