Japanese machinery orders, a closely watched indicator of corporate capital spending, lost steam in October as companies reined in spending amid mounting economic recovery doubts.
Core machinery orders tumbled 4.5 percent in October from a month earlier, the government said yesterday. The figure excludes orders from shipbuilders and electric power companies, which tend to fluctuate more. The result was worse than Kyodo News agency’s forecast for a 4.3 percent decline.
Orders received by 280 core manufacturers that the Cabinet Office polls totaled ¥704.5 billion (US$8 billion) for the month, versus ¥738 billion in September.
PHOTO: BLOOMBERG
October’s fall follows a robust 10.5 percent jump in September, which seemed to point toward growing corporate confidence.
Since then, however, deflation has intensified and the yen has strengthened against the dollar. Compounding worries are questions about the future of export demand as the effect of global stimulus measures wanes.
The government shocked investors and economists on Wednesday with a sharp downward revision of third-quarter GDP. It now says the economy grew at an annual pace of just 1.3 percent, compared with 4.8 percent in its preliminary estimate.
The correction stems largely from a misreading of capital investment — spending by companies on equipment, factories and other assets — which fell 2.8 percent from the previous quarter after the government incorporated additional data. The Cabinet Office had initially estimated that companies increased spending by 1.6 percent.
Goldman Sachs economist Chiwoong Lee said he expected capital expenditures to stage a mild rebound last month.
“That said, we think a bona fide recovery in CAPEX is unlikely without a sharp recovery in export industries in particular,” Lee said in a note to clients.
Overall machinery orders in October rose 3.2 percent, helped by healthy overseas demand, which climbed 15.3 percent. The Cabinet Office predicts that in the current quarter, orders will increase 1 percent from the previous quarter.
In related news, South Korea’s central bank left its key interest rate at a record low for a 10th straight month yesterday, seeking to nurture a budding recovery in Asia’s fourth-biggest economy.
The Bank of Korea’s (BOK) decision to keep the benchmark seven-day repurchase rate at 2 percent came at a monthly policy meeting. The decision was widely expected.
“Domestic economic activity has continued on a recovering trend thanks to progress in the global economic situation. Exports and consumption have continued to improve,” the BOK said in a statement. “However, uncertainty remains over the economic growth path.”
The bank said that for the time being, its monetary policy would focus on sustaining the recovery.
New Zealand’s central bank left its key interest rate unchanged at a record low of 2.5 percent yesterday, the fifth successive review to hold the rate steady.
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