US core capital goods orders unexpectedly fall in June

[WASHINGTON] New orders for key US-manufactured capital goods unexpectedly fell in June, suggesting a pullback in business spending on equipment as the boost from front-loading of activity ahead of tariffs on imports faded.

Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.7 per cent last month after an upwardly revised 2.0 per cent rebound in May, the Commerce Department’s Census Bureau said on Friday (Jul 25). Economists had forecast these so-called core capital goods orders would rise 0.2 per cent after a previously reported 1.7 per cent jump in May.

Shipments of core capital goods increased 0.4 per cent after rising 0.5 per cent in May. Business spending on equipment accelerated sharply in the first quarter amid front-running ahead of President Donald Trump’s aggressive and broad tariffs on imports.

While some of the tariff-related spending to avoid even higher goods prices has persisted, uncertainty over where tariff levels will eventually settle has prompted some businesses to hold off capital expenditures.

A survey from S&P Global on Thursday showed its flash manufacturing PMI contracted in July for the first time since December. S&P Global noted that “any protectionist benefits of import tariffs were often outweighed by concerns over higher prices and rising costs.”

The Atlanta Fed is forecasting economic growth will rebound at a 2.4 per cent annualised rate in the second quarter, largely reflecting a reversal in import flows, which contributed to GDP contracting at a 0.5 per cent pace in the first quarter. REUTERS