Japan's core machinery orders unexpectedly tumbled in May on persistent weakness in the services sector, and the government downgraded the outlook for orders for the first time in eight months, raising doubts about the strength of the economic recovery. The result is also particularly surprising given recent signs of an upswing in momentum.
It suggests policymakers will have their work cut out in their quest to foster sustainable growth - especially if businesses show reluctance to invest, though some analysts caution against reading too much into the weak numbers. Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, dropped 3.6 percent in May from the previous month, Cabinet Office data showed on Monday.
It was the steepest month-on-month decline since August 2016, and sharply undershot the 1.7 percent increase expected by economists in a Reuters poll. In April, they declined 3.1 percent. Core orders from the services sector fell 5.1 percent, down for a third straight month, dragged by declines in orders from transportation firms for computer systems and railway cars, and from telecommunications and construction industries.
Orders from manufacturers rose 1.0 percent in May from the previous month, up for a fourth straight month, led by gains in orders for turbines and boilers. The government cut its assessment of machinery orders for the first time since September 2016, saying they are stalling, in a worrying sign businesses may be turning cautious on investing.
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