US core capital goods orders and shipments rebound in April

NEW orders for key US-manufactured capital goods rebounded more than expected in April and shipments of these goods also increased, suggesting a pickup in business spending on equipment early in the second quarter.

Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 0.3 per cent last month after an upwardly revised 0.1 per cent dip in March, the Commerce Department’s Census Bureau said on Friday (May 24).

Economists polled by Reuters had forecast these so-called capital goods orders edging up 0.1 per cent after declining by a previously reported 0.2 per cent in March. Core capital goods shipments increased 0.4 per cent after dropping 0.3 per cent in March.

Business spending on equipment rebounded marginally in the first quarter after two straight quarterly declines, making a small contribution to the economy’s 1.6 per cent annualised growth pace.

Investment has been hampered by 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022, which have eroded demand for goods and raised financing costs for businesses. Economists expect the US central bank to start its easing cycle in September. The Fed has kept its policy rate in the 5.25 per cent-5.50 per cent range since July. REUTERS