You are here
US durable goods data points to pickup in business spending
[WASHINGTON] New orders for key US-made capital goods rose less than expected in March, but a second straight monthly increase in shipments suggested business investment accelerated in the first quarter amid a recovering energy sector.
While other data on Thursday showed a bigger-than-expected increase in first-time applications for unemployment benefits last week, the trend remained consistent with tightening labor market conditions.
The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.2 per cent last month after gaining 0.1 per cent in February.
Shipments of these so-called core capital goods rose 0.4 per cent after jumping 1.1 per cent in February. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.
Economists had forecast core capital goods orders rising 0.5 per cent last month. March's modest increase suggests a loss of momentum in the manufacturing sector after recent strong growth.
Manufacturing, which accounts for about 12 per cent of the US economy, is being underpinned by the energy sector revival.
Energy services firm Baker Hughes said last Friday that US oil rigs totaled 688 in the week ending April 21, the most in two years. US drillers have added oil rigs for 14 straight weeks and shale production in May was set for its biggest monthly increase in more than two years.
Business spending on equipment is expected to have accelerated from the fourth-quarter's annualized 1.9 per cent growth pace and will likely be one of the few bright spots when the government publishes its advance first-quarter GDP estimate on Friday.
The Atlanta Federal Reserve is forecasting GDP increasing at a 0.5 per cent rate in the first quarter, a sharp slowdown from the fourth-quarter's 2.1 per cent pace. With the labor market near full employment, the anticipated slowdown in growth likely understates the health of the economy.