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Business equipment orders jump by most since early 2018

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A proxy for business investment, non-military capital goods orders excluding aircraft jumped 1.9 per cent in June after a downwardly revised 0.3 per cent increase in the prior month.

Washington

ORDERS placed with US factories for business equipment posted the biggest gain in more than a year and shipments unexpectedly increased, suggesting that corporate investment is regaining momentum despite tariffs and global weakness.

A proxy for business investment, non-military capital goods orders excluding aircraft jumped 1.9 per cent in June after a downwardly revised 0.3 per cent increase in the prior month, according to Commerce Department figures on Thursday that topped estimates. A separate Labor Department report showed that filings for unemployment benefits fell last week to a three-month low, indicating the job market remains tight.

The largest increase in equipment orders since February 2018 was broad-based and could ease concerns that the trade war with China and weakening global growth risk a deeper slowdown in the US economy. Such strength, along with recent data showing firm consumer spending and job gains, may dissuade the Federal Reserve from continuing to cut interest rates after a widely anticipated quarter-point reduction next week.

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Shipments of business equipment also rose from the prior month, compared with projections for a drop, indicating that second-quarter gross domestic product (GDP) due on Friday may be better than previously expected. Analysts had projected an annualised GDP growth rate of 1.8 per cent, down from 3.1 per cent in the first three months of the year, on slowing business investment and a drag from inventories.

US trade negotiators are set to travel to China next week and meet for the first time since talks broke down in May, signalling some progress in reaching a deal between the world's two largest economies.

The broader measure of bookings for all durable goods, or items meant to last at least three years, advanced by more than forecast, reflecting an increase in civilian aircraft and parts orders. Boeing Co booked nine aircraft orders in June following none in May, amid a global flying ban on its 737 Max jets after two fatal crashes. The company said it may temporarily halt production of the model.

Labor Department figures showed that initial jobless claims declined by 10,000 to 206,000 in the week ended July 20. That is the lowest level since mid-April and near a half- century low. Continuing claims also fell to a five-week low.

Shipments of non-military capital goods excluding aircraft - a measure used in GDP calculations - rose 0.6 per cent after a 0.5 per cent increase. The three-month annualised gain increased to 2.4 per cent from 1.5 per cent, while for orders it cooled to 0.3 per cent from 1.6 per cent. BLOOMBERG