Japan machinery orders: Solid result above the consensus forecast – Nomura

Analysts at Nomura note that Japanese core machinery orders (private sector, excluding orders for ships and from electric power companies) rose 10.1% m-m in April 2018, beating the consensus forecast (Bloomberg survey median) for a 2.4% increase.

Key Quotes

“April orders were 8.0% above the monthly average for Jan-Mar, putting them on track to overshoot the forecast for a 7.1% q-q rise from the Apr-Jun machinery manufacturers’ forecast survey (as of late March).”

“Core machinery orders from the manufacturing sector rose by 22.7% m-m in April, with growth here more than enough to regain the ground lost a month earlier (when core machinery orders declined by a sharp 17.5% m-m). Orders from the nonmanufacturing sector also increased by 0.4%, for ongoing growth from the previous month (when orders were up 2.2%).”

“In the manufacturing sector, industries from which orders made marked contributions to overall growth included the shipbuilding industry (+60.6% versus the monthly average for Jan-Mar), where there had been a big-ticket order, and also general-purpose & production machinery (+9.2%), metal products (+37.3%), and nonferrous metals (+72.0%). In the nonmanufacturing sector as well, overall order trends were underpinned most markedly by information services (+18.4%), wholesale & retail trade (+9.8%), and agriculture, forestry, and fisheries (+16.3%).”

“We expect solid capex throughout 2018 on strong capex appetites

We believe these most recent results support our view that capex will remain solid throughout 2018. Considering also that the March BOJ Tankan (released on 2 April) pointed to strong capex appetites, we believe capex will be the main driver of Japanese economic growth going forward.”