Wednesday, 11 October 2006

Japanese core machinery orders up less than expected

Japan's machinery orders data disappointed yesterday. Reuters reports:

The core orders, a volatile figure regarded as a key gauge of corporate capital spending, rose 6.7 percent in August from July on a seasonally adjusted basis, data from the Cabinet Office showed on Tuesday.

The figure was below a median forecast of an 11.4 percent rise and followed a 16.7 percent decline in July, the biggest drop since the government began compiling the data in 1987.

Some economists are concerned.

"Core orders fell from a year earlier for the second straight month, which could be a turning point," said Seiji Adachi, a senior economist at Deutsche Securities.

"We cannot determine the future trend by looking only at the August figures, but September data will be very important. If orders fall, it would be a sign that capital spending may flounder," Adachi said.

Others are not.

Few economists take the weak machinery orders of the past two months as an omen of a sharp slowdown in corporate investments or the overall economy.

"Machinery orders will likely post negative growth in July-September (compared with the previous quarter). But there is no need to worry about the possible drop because it is mostly a rebound from exceptionally strong growth in April-June," said Yoshimasa Maruyama, an economist at BNP Paribas.

The news from Europe was more upbeat. France and Italy reported better-than-expected industrial production for August, rising by 0.8 percent and 1.2 percent respectively. In the UK, the August trade deficit was wider than expected, but retail sales were up in September, as were wages and commercial property development, while the Conference Board's leading index for the UK increased 0.2 percent in August.

Meanwhile, in the US, stocks are still rising in more ways than one, as the Dow Jones industrial average rose to another record close of 11,867.17 yesterday and August wholesale inventories rose 1.1 percent.

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