2018.12.1202:51:00UTC+00Japan Business Investment Should Rebound In Q4: Capital Economics

Japan's machinery order growth was weaker-than-expected in October, yet they point to rising business investment in the fourth quarter, Capital Economics said Wednesday.

That suggests that the slump in Q3 GDP will be reversed in the fourth quarter, the firm's economist Marcel Thieliant said.

Japanese machinery orders rebounded with a 7.6 percent month-on-month increase in October. However, the growth was weaker than economists' expectations for a 9.7 percent increase. In September, orders plunged 18.3 percent.

Manufacturing orders grew 12.3 percent in October, while non-manufacturing orders rose just 4.5 percent. "The bigger picture is that firms are facing the most severe staff and capacity shortages since the early 1990s," Thieliant said.

"While business investment reached a 26-year high relative to output earlier this year, we think it will continue to expand."

Capital Economics expect a 1.5 percent quarter-on-quarter rebound in non-residential investment in the fourth quarter, which suggest that the slump in output in the third quarter will prove temporary.