Japan Machine Oders: An important Economic Indicator?

https://mainichi.jp/english/articles/20200219/p2g/00m/0bu/034000c

Article:

TOKYO (Kyodo) -- Japan's core private-sector machinery orders posted their largest drop in 15 months in December with a 12.5 percent fall from the previous month, as a one-off spike in demand for railway cars faded, government data showed Wednesday.

Comments:

Every country has its own set of economic indicators to try and figure out what is happening in the economy. For example, in " The Secrets of Economic Indicators" by Bernard Baumohl, which is mostly related to the US economy and its important and not so important economic indicators there is no mention of "core machinery orders" as being an important or even an economic indicator for the US economy.

It could be, as most likely, that the "core machinery orders", in Japan has decided it is a key indicator since exports and manufacturing is still a large part of the economy.

Article:

The orders, which exclude those for ships and from utilities due to their volatility, totaled 824.84 billion yen ($7.5 billion), according to the Cabinet Office.

The fall in orders, seen as a leading indicator of capital spending, followed an 18.0 percent jump in November, the biggest increase since comparable data became available in April 2005, boosted by orders for pricey railway cars.

While the 12.5 percent fall marked the sharpest decline since September 2018 when they dropped 17 percent, the Cabinet Office maintained its assessment of orders, saying they are "stalling."

Comments:

"Capital good orders" is related in the US to "durable good orders" and "Capital good orders" is distinctly related to company investments on what is needed to make and produce things. So maybe just a different name for measuring the same type of economic activity.

So we see a decrease in December but an increase in November. As written before, I think its need to be seen that maybe, not all companies buy and spend equally every month. As such it is quite possible one month maybe up and the next month down, as companies maybe don't coordinate their capital spending with all other companies. Yes just an idea, but I think the overall long term trend should be looked at instead of just month to month. But of course maybe it makes for good or interesting economic news.

Article:

While the decline was large in December, it followed a steep rise in November. If we look at the numbers over the course of several months, we do not think that the situation rapidly deteriorated in December," a government official told reporters.

On a quarterly basis, core orders fell 2.1 percent in the October-December period, with the Cabinet Office projecting a 5.2 percent decrease in the quarter to March.

Comments:

As the cabinet official stated it was not too bad a situation for Q4. So again, while we always get these monthly economic news reports, they always have to be taken with a grain of salt, meaning month to month might not be that big a deal, as what happens over the long term might be more important

Of course its important to notice and keep watch of month to month results but they shouldn't be the end of all things if reports show something negatives.

An economy is made up of many different sectors that at any one time be positive or negative. Never is every economic indictors most likely going to be positive and or negative all at the same time.

Article:

The forecast was made based on a survey of 280 manufacturers as of the end of December and is unlikely to reflect concerns about the coronavirus outbreak on businesses, the official said.

In December, orders from non manufacturers, excluding those for ships and from power companies, fell 21.3 percent to 465.96 billion yen, as demand for railway cars and vehicles from transport and postal service operators fell.

Orders from manufacturers rose 4.3 percent to 372.56 billion yen.

Orders from overseas, seen as an indicator of future exports, increased 2.4 percent to 795.09 billion yen, after falling 11.5 percent in November.

Total orders, including from the domestic public sector, fell 9.7 percent to 2.11 trillion yen.

For the whole of 2019, core orders fell 0.7 percent to 10.43 trillion yen, the first decline in two years as the U.S.-China trade dispute dragged down capital spending by manufacturers.

Comments:

As we see, there are both positives, increases, and negatives, decreased in "core machinery orders" from various sectors or groups within the Japanese economy. Again it is important to notice there are positives and negatives all the time even within one economic indicator.

© 2020, Tom Metts, all rights reserved