Japan's core machinery orders fell more than expected in September and the outlook pointed to more weakness, suggesting the economy may underperform as businesses show reluctance to invest amid sluggish demand at home and abroad. Core machinery orders, a highly volatile data series regarded as an indicator of capital spending six to nine months ahead, fell 3.3 percent in September from the previous month, Cabinet Office data showed on Thursday.
That was bigger than a 0.8 percent decline expected by a Reuters poll of economists, following a 2.2 percent drop in August. However, orders rose 7.3 percent in July-September. The outlook was even more gloomier with companies surveyed by the Cabinet Office forecasting that core orders will fall 5.9 percent in October-December from the previous quarter.
That suggested capital expenditure may have a net negative impact on near-term gross domestic product growth in the world's third biggest economy. "Those who look at this round's machinery orders results negatively might lower their outlook (for GDP growth) in the second half of the year," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
However, the machinery orders in the past quarters more or less even out and probably would not dampen GDP growth in the third quarter, Tokuda added. Japan's economy likely expanded for a third straight quarter in July-September, though growth is set to remain fragile. The Cabinet Office will announce the GDP data on November 14 at 8:50 am (2350 GMT, November 13).
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