A worldwide capital-spending slowdown in October hit Japanese equipment makers hard, with a 4.1% monthly drop in orders from September. According to research recently released by Nikko Salomon Smith Barney, the date reconfirms a fast-slipping GDP trend in Japan, which is expected to deteriorate well into the second quarter of 2003.

"Japan has a lot of influence," says equipment analyst Charles R. Yengst, president of Wilton, Conn.-based Yengst Associates. "For example, when an equipment company uses engines from one Japanese supplier, what happens to customers when that supplier goes bankrupt? There's an effect on everyone when Japan begins to shut down."

The Bank of Japan also reports this year's lack of spending is softening an already weak Japanese economy. November marked the 59th consecutive month of economic decline. Yengst estimates that Japan represents 20% of the world's producers of construction equipment.