Japanese Machine Orders surprisingly rose in February, by 1.4%, after the dour month of economic data led forecasters to call for a decline in the figure of -7.0%. February’s figure is the strongest of such since September, when orders grew by 5.5% in the single month. Generally, such a rise in a leading indicator like this would insinuate that the overall economic picture may be starting to improve as the demand for capital intensive goods begins to rise. Such a positive outlook may not necessarily be the rational thing to feel. Much of the underlying activity in the performance of the figure came from an 86.7% rise in the orders for textile machinery. Looking back at history, we’ve noticed that February is an unusually impressive month in terms of the demand for textile machinery; last February this portion of the metric rose 448%. One explanation for such increases during the month is that Japanese clothing manufacturers begin to prepare and produce for the warmer weather 2-3 months prior to the actual realization of the warmth. Demand for non-ferrous metals were the second strongest in the month. Such metals include copper, which had the largest 3-month price rise since 1985 in 09Q1. In essence, much of the rise in the demand for these non-ferrous metals have been price-based but not volume-based. As such, we cannot infer that the surprise move by machine orders is indicative of a sooner-than-expected recovery in the Japanese economy.
