US business investment still soft; jobless claims fall

[WASHINGTON] New orders for key US-made capital goods fell more than expected in September and shipments also declined, a sign that business investment remains weak amid the continuing fallout from the US-China trade war but other data on Thursday showed it has yet to have much effect on the overall jobs market.

The Commerce Department said orders for non-defence capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, fell 0.5 per cent last month on less demand for transportation equipment, motor vehicles and parts, and computers and electronic products.

Data for August was also revised down to show core capital goods orders falling 0.6 per cent instead of declining 0.4 per cent as previously reported. Economists polled by Reuters had forecast core capital goods orders dipping 0.2 per cent in September.

Such goods orders increased 1.0 per cent on a yearly basis. Shipments of core capital goods dropped 0.7 per cent last month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. Shipments for August were flat after being revised from a previously reported 0.3 per cent gain.

"The data are volatile, but through the volatility, trends have slowed significantly," said Jim O'Sullivan, an economist at High Frequency Economics. U.S. Treasury prices rose following the report while US stocks were little changed.

The US Federal Reserve has cut interest rates twice this year and investors currently see another reduction in borrowing costs when policymakers meet next week as the economy grapples with the fallout from a more than year-long US-China trade war and slowing global growth.

The manufacturing sector, which makes up about 11 per cent of the US economy, has been hobbled by the trade dispute, which has hurt business confidence and investment, and cast a cloud of uncertainty over the economic outlook.

US manufacturing output fell more than expected in September, hampered by a strike at General Motors, Fed data showed last week while business investment fell at a 1.0 per cent annualised rate last quarter, the biggest drop since the fourth quarter of 2015, the government reported last month.

Earlier this month, US President Donald Trump outlined the first phase of a deal to end the trade war with China and suspended a threatened tariff hike, but officials on both sides said much more work needed to be done before an accord could be agreed.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, declined 1.1 per cent in September after edging up a revised 0.3 per cent in the prior month.

Another report on Thursday showed the number of Americans filing applications for unemployment benefits unexpectedly fell last week, pointing to a still-tight jobs market even as hiring and economic growth has slowed.

Initial claims for state unemployment benefits declined 6,000 to a seasonally adjusted 212,000 for the week ended Oct 19, the Labour Department said. Data for the prior week was upwardly revised to 218,000.

Economists polled by Reuters had forecast claims edging higher to 215,000 in the latest week. The Labour Department said no states had claims estimated last week.

The overall decrease was despite the ongoing General Motors strike. While striking workers are not eligible for unemployment benefits, the work stoppage has affected production, impacting non-striking employees at suppliers.

The United Auto Workers union reached a tentative agreement with the Detroit automaker last week on a new four-year-contract but will remain on strike until members complete a vote on the proposal by Friday.

REUTERS