US core capital goods orders fall sharply in May
Business spending on equipment is under pressure from higher interest rates and softening demand for goods
NEW orders for key US-manufactured capital goods unexpectedly fell in May, suggesting that business spending on equipment weakened in the second quarter as borrowing costs remain elevated.
Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.6 per cent last month, the Commerce Department’s Census Bureau said on Thursday (Jun 27). Data for April was revised slightly higher to show these so-called core capital goods orders rising 0.3 per cent instead of 0.2 per cent as previously reported.
Economists polled by Reuters had forecast core capital goods orders edging up 0.1 per cent.
Business spending on equipment is under pressure from higher interest rates and softening demand for goods.
A survey from the Institute for Supply Management early this month noted that “demand remains elusive as companies demonstrate an unwillingness to invest, due to current monetary policy and other conditions”.
The Federal Reserve has maintained its benchmark overnight interest rate in the current 5.25 to 5.5 per cent range since last July. Financial markets expect the US central bank to start its easing cycle in September, though policymakers recently adopted a more hawkish outlook. The Fed has hiked its policy rate by 525 basis points since 2022 to quell inflation.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Core capital goods shipments dropped 0.5 per cent after rising 0.4 per cent in April. Non-defence capital goods orders decreased 0.9 per cent, falling for a second straight month. Shipments of these goods tumbled 1.5 per cent after increasing 2.1 per cent in April. These shipments go into the calculation of the business spending on equipment component in the gross domestic product report.
Business spending on equipment rose marginally in the first quarter, making a tiny contribution to the economy’s 1.4 per cent annualised growth pace during that period.
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, edged up 0.1 per cent in May after a downwardly revised 0.2 per cent gain in April.
Durable goods orders were previously reported to have advanced 0.6 per cent in April. Transportation orders rose 0.6 per cent, reflecting a 0.7 per cent increase in motor vehicle orders.
Commercial aircraft orders fell 2.8 per cent. Boeing reported on its website that it had received only four orders for aircraft last month compared to seven in April.
The planemaker has been beset by problems, inviting scrutiny from regulators and customers since a Jan 5 incident in which a smaller 737 MAX operated by Alaska Airlines was forced to make an emergency landing after a fuselage panel blew out mid-flight.
There were decreases in orders for machinery, primary metals as well as electrical equipment, appliances and components. Orders for computers and electronic products nudged up 0.1 per cent. REUTERS
Share with us your feedback on BT's products and services
