"This data is certainly positive for Abenomics but it just points to the beginning of the positive cycle and I doubt it can be sustained given sluggish wages"
- Naoki Iizuka, economist at Citigroup Global Markets
A strong jump in machinery orders are solidifying a durable economic recovery, and sending a welcoming sign for companies to increase capital spending, which is vital for achieving sustained growth. Orders excluding ships and power generation soared 5.4% in August to 819.3 yen, more than double the 2.5% gain expected by analysts. This is the highest growth since June, when orders shot up 10.5%. At the same time, core orders that strips out orders in the private sector, inched higher 3.2% over the corresponding period, while total machinery orders from overseas countries surged 22.4% on a monthly basis.
The latest data, including strong Tankan manufacturing index, are suggesting manufacturing activity should pick up in the last quarter. Furthermore, analysts are expecting companies to step up of capital spending, especially on plant and equipment, after hoarding cash for last decades. So far this year the economy expanded 3.8% an annualized pace during the second quarter, and posted a solid 4.1% growth in the first quarter. While Shinzo Abe is gambling whether the economy is strong enough and his 5 trillion yen of extra stimulus will be enough to support the economy after a sales-tax hike scheduled for April, latest figures are reinforcing a view Abenomics are spreading through the country.
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