November 2, 2018 / 5:44 AM / 19 days ago

Japan September machinery orders set to drop but firms' capex seen staying firm - Reuters poll

TOKYO (Reuters) - Japan’s core machinery orders likely fell in September, following two straight months of gains as natural disasters hit business activity, according to a Reuters poll of analysts.

FILE PHOTO: Heavy machines are seen at a construction site in Tokyo, Japan June 8, 2018. REUTERS/Issei Kato

But analysts expect firms’ appetite for capital investment to remain bullish and the fall in core machinery orders to be temporary as businesses look to invest in technologies that improve productivity.

Core machinery orders, a volatile data series regarded as an indicator of capital spending in the coming six to nine months, were seen falling 10.0 percent in September from the previous month, the biggest fall since 2014, the poll of 17 economists showed.

They jumped 11.0 percent in July and rose 6.8 percent in August.

From a year earlier, core machinery orders, which exclude those for ships and electric power utilities, likely rose 7.7 percent in September, the poll showed.

“We expect core machinery orders will rise moderately as manufacturers continue to strengthen capital expenditure for capacity building and for labour-saving to cope with labour shortages,” said Yutaro Suzuki, an economist at Daiwa Institute of Research.

Typhoons and earthquakes in September led to supply constraints, the impact of which has been seen in some economic indicators.

“But they are unlikely to adversely affect companies’ investment behaviour,” said Kola Miyamae, senior economist at SMBC Nikko Securities.

The Cabinet Office will publish the machinery orders data at 8:50 a.m. Japan time on Thursday (2350 GMT, Wednesday).

The poll also found Japan’s current account surplus likely fell to 1.77 trillion yen (£12.1 billion) in September from a 1.84 trillion yen surplus in August.

Higher oil prices inflated import costs while natural disasters weighed on exports, which likely narrowed trade surplus, analysts said.

The finance ministry will publish the current account data at the same time with machinery orders on Thursday.

Household spending, due on Tuesday, was expected to rise 1.6 percent in September from a year earlier, slowing from a 2.8 percent gain in August when bigger bonuses boosted consumption.

Reporting by Kaori Kaneko; Editing by Sam Holmes

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