US core capital goods orders rise ahead of Middle East war
Bookings for non-defence capital goods excluding aircraft increased 0.6%
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[WASHINGTON] US orders for business equipment rebounded in February, suggesting companies were moving forward on investment plans before the Iran war.
Bookings for non-defence capital goods excluding aircraft, a proxy for investment in equipment, increased 0.6 per cent after a downwardly revised 0.4 per cent decline a month earlier, Commerce Department figures showed on Tuesday (Apr 7). The median forecast in a Bloomberg survey of economists called for a 0.5 per cent advance in February.
Bookings for all durable goods – items meant to last at least three years – fell 1.4 per cent, largely reflecting a decline in orders for aircraft. Boeing said it received fewer orders for its planes in February than a month earlier.
The durables report showed orders increased for computers, motor vehicles, metals and machinery.
Economists expect business investment will remain solid again this year as companies keep spending on artificial intelligence and take advantage of more favourable tax provisions. At the same time, it’s unclear how guarded firms will become because of the Iran war. The conflict has sharply driven up prices of oil and some other commodities.
Meanwhile, non-defence capital goods shipments excluding aircraft, which feed into the equipment investment portion of the gross domestic product report, increased 0.9 per cent. Rather than orders that can be cancelled, the government uses data on shipments as an input to GDP.
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Economists prefer the core equipment shipments and orders figures because they offer a clearer picture of the trend in underlying business investment and the impact on the economy.
Before the durables report, the Federal Reserve Bank of Atlanta Fed’s GDPNow forecast anticipated a nearly 0.75 percentage point contribution to first-quarter growth from business spending on equipment. Those outlays contributed 0.21 point in the fourth quarter.
The Commerce Department’s report showed bookings for commercial aircraft, which are volatile from month to month, fell nearly 29 per cent from a month earlier. Boeing said it received 21 orders in February, down from 107 the prior month.
Boeing also reported it delivered 51 aircraft in February, up from 46 shipments a month earlier.
Orders for defence capital goods fell for a second month, the report showed. BLOOMBERG
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