US core capital goods orders tepid; shipments drop

[WASHINGTON] New orders for key US-made capital goods barely rose in November and shipments fell, suggesting business investment will probably remain a drag on economic growth in the fourth quarter.

The White House's 17-month trade war with China has hurt business confidence, undermining capital expenditure. Despite a recent easing of tensions in the US-China trade war, regional manufacturing surveys showed business confidence remaining subdued in December.

Even if business confidence were to improve in early 2020, a turnaround in capital expenditure is unlikely. Boeing announced last week it would suspend production of its best-selling 737 MAX jetliner in January as fallout from two fatal crashes of the now-grounded aircraft drags into 2020.

The Commerce Department said on Monday orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, edged up 0.1 per cent last month as a surge in demand for electrical equipment, appliances and components was partially offset by a drop in machinery orders.

These so-called core capital goods orders rose by an unrevised 1.1 per cent in October. Economists polled by Reuters had forecast core capital goods orders gaining 0.2 per cent in November.

Core capital goods orders rose 0.7 per cent on a year-on-year basis in November.

US financial markets were little moved by the data.

Shipments of core capital goods dropped 0.3 per cent last month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. Core capital goods shipments rose by a downwardly revised 0.7 per cent in October. They were previously reported to have jumped 0.8 per cent.

Business investment has contracted for two straight quarters, with weak spending on equipment and nonresidential structures such as gas and oil well drilling contributing to the decline that has pushed manufacturing into recession.

Boeing's biggest assembly-line halt in more than 20 years is expected to disrupt supply chains, further depressing manufacturing, which accounts for 11 per cent of the economy. Economists estimated that Boeing's suspension of the 737 MAX aircraft production could cut first-quarter 2020 gross domestic product growth by at least half a percentage point.

Last month, overall orders per cent in the prior month.

Durable goods orders were held down by a 72.7 per cent plunge in demand for defence aircraft orders and parts last month. Economists expect a rebound after the US Congress passed a huge defence spending bill last week.

Orders for transportation equipment dropped 5.9 per cent after edging up 0.1 per cent in October. Motor vehicles and parts orders increased 1.9 per cent in November. Orders for non-defence aircraft and parts fell 1.8 per cent last month.

Overall shipments of durable goods nudged up 0.1 per cent in November, reversing October's 0.1 per cent drop. Durable goods inventories increased 0.4 per cent last month. They have risen in 16 of the last 17 months. Unfilled durable goods orders fell 0.4 per cent in November after being unchanged in October.

REUTERS