TOKYO, Reuters – Japan’s core machine orders rose in October. This is a positive sign that companies are spending more and the economy is recovering from months of supply shortages.

After a stronger-than-expected July-September contraction, the world’s third largest economy will see a strong rebound in the current quarter. However, the future outlook remains uncertain due to uncertainty surrounding the Omicron coronavirus variant.

According to Cabinet Office data, core machinery orders, an indicator of capital spending for the six-to nine months ahead, rose by 3.8% in October compared with the month before, according to Monday’s Cabinet Office data.

This was compared to the 2.1% growth forecasted by economists using Reuters polls and followed no changes in September.

The global COVID-19 virus outbreak caused a slowdown in capital expenditures by companies during the third quarter. It primarily affected automakers and others that are dependent on Asian suppliers of parts.

Although supply issues have eased somewhat, spending and production outlook remain sluggish. According to the Bank of Japan, Monday’s Tankan quarterly survey showed that large-scale manufacturers were not as happy in December than they were in October.

At this week’s policy review, the central bank will debate whether or not to extend pandemic assistance programmes past their March 2022 deadline. However, no changes to its extremely easy monetary policy are expected.