Core US capital goods orders beat forecasts with 0.8% jump in January

Washington

NEW orders for key US-made capital goods rose by the most in six months in January and shipments increased, pointing to solid business spending on equipment at the start of the year.

The stronger-than-expected report from the Commerce Department on Wednesday could prompt economists to upgrade their very low growth estimates for the first quarter. Still, it will probably do little to change views that the economy continued to lose momentum early in the year, with retail sales rising moderately in January and inflation broadly tame in February.

Orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, rebounded 0.8 per cent, the biggest gain since July. These so-called core capital goods orders fell 0.9 per cent in December.

Economists polled by Reuters had forecast core capital goods orders edging up 0.1 per cent in January. Core capital goods orders increased 3.1 per cent on a year-on-year basis.

Shipments of core capital goods jumped 0.8 per cent in January after edging up 0.1 per cent in the prior month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

The January report was delayed by a 35-day partial shutdown of the federal government that ended on Jan 25. The February report, which was scheduled for release later this month, will now be published on April 2.

The surge in core capital goods shipments suggests spending on equipment maintained its solid pace of growth after accelerating in the fourth quarter. That could provide a lift to first-quarter GDP growth estimates after they were slashed to as low as a 0.2 per cent annualised rate after a report on Monday showing a small rise in January retail sales.

The economy is losing steam as the stimulus from a US$1.5 trillion tax cut fades. A trade war between the United States and China, slowing global economies and uncertainty over Britain's exit from the European Union are other factors hurting activity.

The economy grew at a 2.6 per cent pace in the fourth quarter. A second report from the Labor Department on Wednesday showed its producer price index for final demand edged up 0.1 per cent in February, lifted by a rebound in the cost of gasoline. The PPI had dropped for three straight months.

US Treasury prices fell slightly after the data, while the dollar was little changed against a basket of currencies. US stock futures were slightly higher.

In the 12 months through February, the PPI rose 1.9 per cent.

That was the smallest gain since June 2017 and followed a 2.0 per cent increase in January. Economists polled by Reuters had forecast the PPI rebounding 0.2 per cent in February and advancing 1.9 per cent on a year-on-year basis.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.1 per cent last month after climbing 0.2 per cent in January.

The so-called core PPI increased 2.3 per cent in the 12 months through February, the smallest rise since December 2017, after advancing 2.5 per cent in January.

Data on Tuesday showed consumer prices rising moderately in February, with the consumer price index posting its smallest annual gain in nearly 21/2 years. REUTERS