Uptick in New Machinery Orders In May

Well, nothing in economics is ever a one way street, and just to prove it orders for Japanese machinery rose at 10 times the pace most economists were expecting in May, as demand increased for equipment used to make semiconductors and steel. Machinery and equipment orders, which give some indication of likely capital spending in the next three to six months, rose 10.4 percent from April when they were up 5.5 percent, according to the Cabinet Office this morning.



Orders from the steel industry surged 131 percent, and for electrical machinery climbed 34 percent while demand for equipment used to make cars fell 3.3 percent. Today's reading can be seen tpo some extent as a reaction to declines in February and March, when orders dropped 12.3 percent and 8.3 percent, but the profit squeeze caused by higher oil costs without real price leverage may well prompt companies to once more cut spending in the coming months.

Overseas orders were up 21.1% from a 4.6% rate of increase in April. This may indicate that June exports could "bounce up" a little bit.