By Daniel Leussink
TOKYO (Reuters) – Japan’s core machinery orders slipped for the first time in five months in January, a worrying sign for an economy already facing heightened pressure from the Ukraine war and high energy and raw material prices.
The decline in core orders hurts hopes that a pickup in business spending will support private demand in the world’s third-largest economy as firms struggle with surging input prices, a chip shortage and supply disruptions.
Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, contracted 2.0% in January from December, posting their first drop in five months, the Cabinet Office data showed.
It was largely in line with economists’ median estimate of a 2.2% contraction and followed a 3.1% jump in the previous month.
Japanese firms could delay spending plans due to higher commodity and transportation costs that are sending wholesale inflation soaring and squeezing corporate margins.
Compared with a year earlier, core orders, which exclude volatile numbers from shipping and electric power utilities, advanced 5.1% in January, the data found.
“The fall in machinery orders in January suggests that business investment may not recover much this quarter from a disappointing 2021,” said Tom Learmouth, Japan economist at Capital Economics.
January core orders were 0.8% their fourth-quarter average, Learmouth said. “That’s consistent with a small rise in spending on machinery and transport equipment, which makes up around half of business investment,” he wrote in a note.
By sector, orders from manufacturers lost 4.8% month-on-month, while those from non-manufacturers saw a 1.9% contraction.
The government kept its assessment on machinery orders unchanged, saying they were picking up.
After contracting in the third quarter of last year, Japan’s economy returned to growth in October-December. But the rebound was smaller than initially estimated due to weaker growth in private consumption and capital expenditure.
Ruling coalition officials this week called for a fresh spending package to offset the economic blow from the Ukraine crisis, which is already hurting households and retailers by driving up energy and food costs.
(Reporting by Daniel Leussink; Editing by Sam Holmes)