US core capital goods orders rebound sharply in May

[WASHINGTON] New orders for key US-manufactured capital goods rebounded sharply in May as demand increased broadly, suggesting business spending on equipment would again underpin economic growth in the second quarter.

Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.6 per cent last month after an upwardly revised 0.7 per cent decline in April, the Commerce Department’s Census Bureau said on Thursday (Jun 25).

Economists polled by Reuters had forecast these so-called core capital goods orders rebounding 0.6 per cent after a previously reported 1.0 per cent drop in April.

But some of last month’s increase in orders likely reflected higher prices, especially for memory chips. Businesses are ramping up investment in artificial intelligence, fuelling demand for information processing equipment and other related products. That is helping to blunt the hit on manufacturing from the US-Israeli war with Iran, which has disrupted supply chains and driven up prices of commodities, including oil and aluminium.

Orders for computers and electronic products rebounded 0.3 per cent, while those for electrical equipment, appliances and components rose 0.3 per cent. There were hefty increases in orders for fabricated metal products, primary metals and machinery. Core capital goods shipments rose 0.3 per cent in May after increasing 0.5 per cent in April.

Business spending on equipment recorded double-digit growth in the first quarter. Gross domestic product growth estimates for the second quarter are currently as high as a 3.0 per cent annualised rate. The economy grew at a 2.1 per cent pace in the January-March quarter.

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Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, fell 4.5 per cent in May after surging 8.5 per cent in April, the Census Bureau reported. They were dragged down by a 51.8 per cent plunge in non-defence aircraft and parts orders, a very volatile category.

Boeing reported on its website that it had received only 27 aircraft orders in May compared to 136 in April. REUTERS