US business equipment orders remain tepid on high interest rates
ORDERS placed with US factories for business equipment increased slightly in July after a downward revision to the prior month, suggesting companies are somewhat cautious about capital investment amid high borrowing costs and economic concerns.
The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, increased 0.1 per cent last month after a revised 0.4 per cent decline in June, Commerce Department figures showed on Thursday (Aug 24). The data aren’t adjusted for inflation.
Bookings for all durable goods – items meant to last at least three years – slid by the most since April 2020, reflecting fewer bookings for commercial aircraft. Excluding transportation equipment, orders rose 0.5 per cent.
The figures underscore how high borrowing costs, stiffer credit terms and lingering economic uncertainty are curbing firms’ desire to pursue longer-term capital investments. The report showed a decline in bookings for computers and related products.
Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, decreased for a second month. The first estimate of third-quarter GDP will be released in late October.
Economists are generally optimistic about growth in the current quarter, in the wake of data pointing to a durable American consumer. Last quarter, GDP exceeded economists’ forecasts in part due to the strength of business investment.
The Commerce Department’s report showed bookings for commercial aircraft, which are volatile from month to month, decreased nearly 44 per cent after surging in the month prior.
Boeing reported 52 orders in July, about a sixth of the June tally. While often helpful to compare the two, aircraft orders are volatile and the government data don’t always correlate with the planemaker’s monthly figures.
Orders for defence capital goods rose 2.5 per cent after large declines in prior months.
SEE ALSO
Regional and national surveys of manufacturing have pointed to widespread weakness across the sector. S&P Global factory purchasing managers data for August showed a further deterioration in new orders, and the Institute for Supply Management’s manufacturing gauge has indicated contraction for nine months. BLOOMBERG
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