Tags: Japanese | Machinery | Orders

Japanese Machinery Orders Rise Less Than Forecast

Wednesday, 11 Aug 2010 02:27 PM

Japanese machinery orders rose less than than expected in June and manufacturers expect orders to pick up only gradually in the current quarter, boding ill for a recovery in capital spending amid a slowdown in exports.

Wholesale prices unexpectedly fell in July, separate data showed on Wednesday, in a sign deflationary pressure continues to plague the economy due to a large gap between supply and demand.

The machinery orders data could be a worrying sign for Japanese Prime Minister Naoto Kan, who is fighting to retain his post after his ruling Democratic Party's defeat in an upper house election last month.

Division within Democrat ranks could potentially distract the government as the yen's surge toward a 15-year high against the dollar threatens the outlook for the economy. A stronger yen reduces corporate profits earned overseas, makes exports more expensive and exacerbates deflation by lowering import prices.

"(Capital expenditure) is expected to stay at a low level amid expectations for weak private consumption and a slowdown in exports," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

"Unless the risk for a double-dip recession increases, the Japanese government is unlikely to implement additional stimulus steps. But if the yen continues to stay on a firm trend and has a negative impact on the economy, the authorities will have to do something."

Core private-sector machinery orders, a highly volatile series regarded as an indicator of capital spending, rose 1.6 percent in June, the Cabinet Office said on Wednesday, much less than the median market forecast for a 5.5 percent increase.

Manufacturers' orders rose 9.9 percent in June, rebounding from a 13.5 percent decline in the previous month. The data also showed orders from the services sector fell 3.9 percent, the second month of declines.

Manufacturers surveyed by the Cabinet Office forecast that core orders, which exclude those for ships and machinery at electric power firms, will rise 0.8 percent in July-September from the previous quarter.

That would be only a small acceleration from a 0.3 percent rise in the April-June quarter.

Second-quarter gross domestic product likely rose 0.6 percent from the previous quarter, less than 1.2 percent growth in the previous quarter, as export growth and private consumption slowed, according to a Reuters survey before the release of the GDP data on Aug. 16.

There is growing worry among policy makers globally as signs of a slowdown in China and the United States suggest the world economic outlook is less robust than initially expected.

The Federal Reserve on Tuesday took a small but significant step to counter a weakening U.S. economic recovery, saying it would use cash from maturing mortgage bonds it holds to buy more government debt.

The Bank of Japan on Tuesday held off on new policy steps to combat a stronger yen, saving its limited firepower in case the currency's rise accelerates and threatens the country's fragile economic recovery.

Japanese wholesale prices fell 0.1 percent in the year to July, Bank of Japan data showed, against the median forecast for a 0.1 percent rise.

Wholesale prices fell 0.1 percent in July from the previous month, compared with the median estimate for a 0.1 percent increase.

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Japanese machinery orders rose less than than expected in June and manufacturers expect orders to pick up only gradually in the current quarter, boding ill for a recovery in capital spending amid a slowdown in exports. Wholesale prices unexpectedly fell in July, separate...
Japanese,Machinery,Orders
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2010-27-11
Wednesday, 11 Aug 2010 02:27 PM
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