Orders for US business equipment barely rise ahead of election
The value of core capital goods orders increased 0.2% last month after a drop of the same magnitude in July
ORDERS placed with US factories for business equipment rose only slightly in August, suggesting firms are limiting investment ahead of the election and further declines in borrowing costs.
The value of core capital goods orders, a proxy for investment in equipment excluding aircraft and military hardware, increased 0.2 per cent last month after a drop of the same magnitude in July, Commerce Department figures showed Thursday (Sep 26). The data aren’t adjusted for inflation.
Bookings for all durable goods – items meant to last at least three years – stalled on fewer orders for commercial aircraft.
Excluding transportation equipment, orders climbed 0.5 per cent.
Though many businesses are still committed to making long-term investments, uncertainty about the November presidential election and future demand has caused firms to be cautious about expansion plans. That suggests factory production may struggle for momentum in the coming months.
At the same time, the likelihood of cheaper financing costs in the coming year after the Federal Reserve cut interest rates by a half percentage point this month could help bolster demand and encourage companies to move forward on investment plans.
Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, climbed 0.1 per cent after falling 0.4 per cent in July. Before the report, the Atlanta Fed’s GDPNow forecast penciled in an increase in business equipment spending for the third quarter.
Separate data on Thursday showed outlays for business equipment increased at a nearly 10 per cent annualised rate in the second quarter. That, along with a pickup in consumer spending, helped fuel a 3 per cent annualised increase in gross domestic product during the period. BLOOMBERG
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