Japan Core Machinery Orders Unexpectedly Decline

Japan’s core machinery orders unexpectedly declined in May signaling a notable fall in capital spending on machinery and equipments, data from the Cabinet Office revealed Wednesday.

Producer price inflation slowed for the sixth consecutive month in June on lower energy cost, another official data showed today.

Machinery orders, excluding volatile ones for ships and those from electric power companies, plunged 7.6 percent on a monthly basis in May, in contrast to the 5.5 percent increase in April.

The decline also confounded economists’ forecast of 1.0 percent growth. The fall was largely driven by the 19.4 percent decrease in orders from the non-manufacturing sector.

Core machinery orders registered an annual decline of 8.7 percent, which was bigger than the 5.9 percent fall seen in April. Economists had forecast orders to drop slightly by 0.2 percent.

Despite the fall in core machinery orders, business investment will probably grew in the second quarter, Capital Economics’ economist Darren Tay said.

However, the economist said the bigger picture is that recessions in other large advanced economies and shrinking real disposable incomes in the second half will dampen both domestic and foreign demand, and in turn a recession is still likely this year.

Producer prices logged an annual increase of 4.1 percent, following May’s 5.2 percent growth, the Bank of Japan reported. Prices were expected to climb 4.3 percent.

Month-on-month, producer prices were down 0.2 percent, but slower than the 0.7 percent decrease posted in May.

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