Machinery orders still weak despite pick-up in July

The second successive monthly rise in Japanese core machinery orders in July, announced today, does not suggest business capital spending will expand in Q3. The level of orders remains low, firms expect a contraction over the quarter as a whole, and the underlying trend is at best flat and at worse turning sharply negative. The decline in activity in the tertiary sector, also announced today, adds to evidence of a contraction in the economy in Q3.