Photo Credit: Bloomberg
Orders for Japanese-made machines were up ten times more than expected, showing that excess capital is making its way to capital goods orders. This kind of news is not only good for Japan, which has been fighting a stagnating economy and deflation, but is also good for the worldwide economy. Investments in capital goods in the form of production are seen as a positive investment both for factories and the production capabilities around the world.
Equipment orders grow significantly
Equipment orders were up tremendously, experiencing a 10.4% growth since April when they rose a whopping 5.5%. The kicker is that analysts were only predicting as much as a 1.1% gain. The growth in machine orders was attributed to a growing desire for goods from developing nations, even with a US economic slowdown. Lower exports to the United States have been negated by larger orders from developing nations, such as China and India. China’s inflation is helping Japan in a big way; more money is flowing to its oceanic neighbor.
Orders from other industries grow as well
Surprisingly, the steel industry also experienced growth in orders, which were up 131% year over year. Electronic orders were also up 34%, but nothing could help the automotive industry, whose orders dropped by 3.3% year over year. A sagging auto market in the United States is still to blame for weakening earnings from Asian auto producers.
Economists were quick to point out that the gains were unusual and should come with lowered optimism for the rest of the year. Lower corporate profits and high commodity prices still weigh on any market, regardless of what goods are needed. Higher shipping fees and energy costs are impacting everyone, and that is just as much the case in Japan. Needless to say, the gains are appreciated.