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US core capital goods orders post biggest gain in nine months

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New orders for key US-made capital goods increased by the most in nine months in October and shipments rebounded, suggesting some stabilisation in business investment after it contracted for two straight quarters.

[WASHINGTON] New orders for key US-made capital goods increased by the most in nine months in October and shipments rebounded, suggesting some stabilisation in business investment after it contracted for two straight quarters.

The Commerce Department said on Wednesday orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.2 per cent last month, the largest gain since January. These so-called core capital goods orders were boosted by increased demand for machinery, computers and electronic products and fabricated metals.

Data for September was revised slightly up to show core capital goods orders declining 0.5 per cent instead of decreasing 0.6 per cent as previously reported. Economists polled by Reuters had forecast core capital goods orders would drop 0.3 per cent in October.

Core capital goods orders accelerated 0.9 per cent on a year-on-year basis. Shipments of core capital goods increased 0.8 per cent last month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

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Core capital goods shipments fell by a revised 0.8 per cent in September. They were previously reported to have decreased 0.7 per cent.

The Trump administration's 16-month trade war with China has eroded business confidence, leading to a downturn in capital expenditure and manufacturing. There is still no sign that business investment will rebound even as the United States and China have inched closer to a partial trade deal.

Regional manufacturing surveys remain weak and output at factories dropped for a second straight month in October. Federal Reserve officials have blamed the business investment slump on the US-China trade war and sluggish global growth, and do not anticipate a material improvement in the near term.

Business investment declined for a second straight quarter in the third quarter, the longest such stretch since late 2015.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 0.6 per cent in October after falling 1.4 per cent in the prior month.

Orders for transportation equipment gained 0.7 per cent after plunging 3.2 per cent in September. Motor vehicles and parts orders dropped 1.9 per cent last month. Orders for non-defense aircraft and parts increased 10.7 per cent in October. 

REUTERS