Japan Machinery Orders Fell 9.1% in May

Japan’s machinery orders, a closely watched indicator of future business investment, dropped more than expected in May, signaling that a recovery in the world’s No. 2 economy is faltering.

The Cabinet Office said Thursday Japan’s core machinery orders in May tumbled 9.1 percent — the biggest drop since August 2008 — to 693 billion yen ($7.9 billion). The figure excludes volatile numbers from shipbuilders and electric power companies.

The May result was far worse than a 2.5 percent decline projected by economists in a Kyodo News survey and was the first fall in three months.

“The figure means companies are becoming cautious about making new investments due to growing uncertainty over an economic recovery,” said Hiroshi Watanabe, an economist at Daiwa Institute of Research.

“The poor result indicated that the pace of Japan’s economic recovery is faltering,” he said.

Growth in machinery orders is vital to Japan’s economy. Corporate investment alone accounts for around 13 percent of Japan’s gross domestic products.

In May, orders from manufacturers dropped 13.5 percent due to a slump in the electronics and oil sectors. Orders from non-manufacturers was down 6.0 percent, the first decline in three months. Overseas orders rose 2.7 percent in May.

While core machinery orders fell sharply in May, Japan’s government said it would keep its projection in the April-June quarter. The government estimates core machinery orders in the period to grow 1.6 percent from the previous quarter.

Japan’s core machinery orders have been rising on a quarterly basis since the July-September period last year when they slipped 0.7 percent.

TOKYO (AP)