Japan machinery orders surprisingly rise for 2nd straight month in July

Machinery orders in Japan unexpectedly rose for the second straight month in a row in July, releasing a preliminary sign that the ailing economy is on a gradual path of improving demand, leading to higher corporate spending.

Japan’s core machinery orders increased at a seasonally adjusted 4.9 percent in July, compared to 8.3 percent in June, data released by the Cabinet Office showed Monday. A median estimate of economists called for a decline of 2.8 percent.

Further, core orders rose 5.2 percent y/y in July. Following the unexpected result, the Cabinet Office has upgraded its assessment of machinery orders, saying they were showing signs of recovery. The report further mentioned that a rise in demand from the non-manufacturing sector had fueled overall demand.

In addition, the increase in orders comes after business investment slumped during the first half of the year, as managers exercised caution amid prevailing economic slowdown in China. Also, concerns about Britain’s decision to leave the European Union had added to the overall cloudy sentiment.

The Japanese economy expanded just 0.2 percent in the second quarter, according to revised estimates released last week. Capital expenditure fell 0.1 percent on the quarter, compared to a preliminary estimate of a 0.4 percent decline.

Meanwhile, Japan Ministry of Economy, Trade and Industry is scheduled to release the industrial production figures on Sep 14, followed by weekly capital flows data from the Ministry of Finance on Sep 15.