Japanese Machinery Orders Tumble in July

Instead of expectations of a modest decline in July, private machinery orders excluding ships and utilities (Headline Series) in Japan fell by 16.7% from June. This was the largest drop in this volatile series over the past five and one-half years as shown in the first chart.

The components of the headline series-- manufacturing machinery, declined 18.7% in July from June and nonmanufacturing excluding ships and utilities, 15.8%. When plotted on a log scale, which equalizes percentage changes and thus gives a better idea of trends, manufacturing orders show a strong positive trend and nonmanufacturing excluding ships and utilities shows no significant trend as can be seen in the second chart.

In addition to the Headline Series, most of the other series pertaining to machinery orders declined significantly in July. Total orders fell 16.0%, domestic orders for machinery fell 12.6% and foreign orders fell 21.4%. Again, when plotted on a log scale, domestic and foreign orders show different trends with domestic orders showing no significant trend up or down, while foreign orders, although more volatile than domestic orders, showing an upward trend since early 2002.