Plunging Japan Tool Orders Spells Trouble at World’s Factories

(Bloomberg) --

Orders for Japanese machine tools fell last month to the lowest level in seven years, signaling that already-weak manufacturing investment has taken another hit from the coronavirus.

Orders fell 30% from a year earlier to 76.7 billion yen ($734 million) in February, the lowest total since January 2013, the Japan Machine Tool Builders’ Association reported Tuesday. The orders are a leading indicator of future spending on factory equipment.

Orders for Japanese machine tools have dropped 17 months straight amid trade wars and weak global demand, but the coronavirus is likely to have exacerbated the slump.

February’s slide adds to the gloomy outlook for the world’s third-largest economy. Most analysts see Japan falling into a recession following the sharpest contraction in more than five years last quarter.

As bad as last month’s order numbers look, the reality is probably worse because the early timing of the Lunar New Year holiday this year added three days to the business calender in China and other Asian markets that purchase Japanese equipment, skewing year-on-year comparisons.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Jason Clenfield

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