You are here

US businesses spend less on equipment in December

[WASHINGTON] Rising sales of US autos and aircraft in December masked fresh signs of weakening business investment at the end of 2018, government data showed Thursday.

Together with a sudden plunge in manufacturing in the Philadelphia region, the figures confirmed a softening in US factory activity.

The weaker numbers seem to support the Federal Reserve's recent decision to hold off on any further interest rate increases, after hiking four times last year, amid signs the economy could be slowing.

Sales of big-ticket manufactured goods rose 1.2 per cent in December to US$254.4 billion, the Commerce Department reported, which was slightly below what economists were expecting from the report that was delayed by 35-day government shutdown.

sentifi.com

Market voices on:

Sales of autos and parts rose 2.1 per cent from November while civilian aircraft soared 28.4 per cent.

But outside the highly volatile transportation segment, sales rose a paltry 0.1 per cent, also lower than expectations.

Primary metals, a sector benefitting from President Donald Trump's steep new import duties, fell nearly a full percentage point.

And machinery, computers, telecommunications equipment also all fell.

Meanwhile, spending on "core" capital goods - which strips out aviation and defense items - fell 0.7 per cent, deepening November's losses which were also revised downward to a one percent loss.

The White House has said a major rationale for 2017's sweeping tax cuts was to boost business investment, which would in turn spur hiring and economic growth, but instead weakened at the end of last year.

Economist Joel Naroff said that combined with weak housing sales numbers in January, the industrial data meant "it appears the bloom is off the economic expansion rose."

"Whatever business spending boom we got from the tax cuts looks like it has dissipated," he said in a client note.

"The economy is coming off its tax-induced sugar high."

Still, chief White House economist Kevin Hassett said this week that the factories built last year should contribute to robust and sustained economic growth in 2019 of three percent or more.

In a separate report Thursday, the Philadelphia Federal Reserve Bank said its regional manufacturing index unexpectedly dropped to a reading of negative 4.1, well below the 12 that economists had been expecting.

Analysts say the indicator may not tell the full story as expectations for the future were rosier, but it was the first negative reading in almost three years and continued a steady slowing trend since early 2017.

AFP