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US core capital goods orders unexpectedly fall

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New orders for key US-made capital goods unexpectedly fell in August and shipments rebounded moderately, pointing to continued weakness in business investment after it declined at its steepest pace in 3-1/2 years in the second quarter.

[WASHINGTON] New orders for key US-made capital goods unexpectedly fell in August and shipments rebounded moderately, pointing to continued weakness in business investment after it declined at its steepest pace in 3-1/2 years in the second quarter.

The Commerce Department said on Friday orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.2 per cent last month amid weak demand for electrical equipment, appliances and components, and computers and electronic products.

Data for July was revised down to show these so-called core capital goods orders unchanged instead of gaining 0.2 per cent as previously reported. Economists polled by Reuters had forecast core capital goods orders unchanged in August.

Core capital goods orders increased 1.1 per cent on a year-on-year basis. Shipments of core capital goods rose 0.4 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 an unrevised 0.6 per cent in July. The Trump administration's nearly 15-month trade war with China has been blamed for the downturn in business investment.

Federal Reserve Chair Jerome Powell last week said trade policy tensions, which "have waxed and waned, and elevated uncertainty is weighing on US investment and exports," posing an ongoing risk to the longest economic expansion on record, now in its 11th year. Mr Powell said US central bank contacts had told policymakers that trade policy uncertainty "has discouraged them from investing in their businesses."

The Fed cut interest rates again last Wednesday after lowering borrowing costs in July for the first time since 2008.

Business investment declined at a 1.0 per cent annualised rate last quarter, the biggest drop since the fourth quarter of 2015, the government reported on Thursday. Weak business investment is underscored by manufacturing, where output has contracted for two straight quarters. Manufacturing, which accounts for about 11 per cent of the economy, is also being undercut by weak global demand and design problems at planemaker Boeing

Last month, orders for electrical equipment, appliances and components dropped 1.3 per cent, the most since November 2018. There were also decreases in orders for computers and electronic products. But orders for machinery rebounded 0.6 per cent. There were also gains in orders for primary metals and fabricated metal products.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 0.2 per cent in August after surging 2.0 per cent in the prior month.

Orders for transportation equipment fell 0.4 per cent after jumping 7.2 per cent in July. Motor vehicles and parts orders decreased 0.8 per cent last month. Orders for non-defence aircraft and parts tumbled 17.1 per cent. Boeing reported on its website that it had received only six aircraft orders in August after getting 31 orders in July. 

REUTERS