US core capital goods orders unexpectedly fall in August
New orders
for key U.S.-made capital goods unexpectedly fell in August and shipments
rebounded moderately, pointing to continued weakness in business investment
after it declined at its steepest pace in 3-1/2 years in the second quarter.The
Commerce Department said on Friday orders for non-defense capital goods
excluding aircraft, a closely watched proxy for business spending plans,
dropped 0.2% last month amid weak demand for electrical equipment, appliances
and components, and computers and electronic products. Data for July was
revised down to show these so-called core capital goods orders unchanged instead
of gaining 0.2% as previously reported. Economists polled by Reuters had
forecast core capital goods orders unchanged in August. Core capital goods
orders increased 1.1% on a year-on-year basis. Shipments of core capital goods
rose 0.4% last month. Core capital goods shipments are used to calculate
equipment spending in the government’s gross domestic product measurement. Core
capital goods shipments fell by an unrevised 0.6% in July. The Trump
administration’s nearly 15-month trade war with China has been blamed for the
downturn in business investment. Federal Reserve Chair Jerome Powell last week
said trade policy tensions, which “have waxed and waned, and elevated
uncertainty is weighing on U.S. investment and exports,” posing an ongoing risk
to the longest economic expansion on record, now in its 11th year. Powell said
U.S. central bank contacts had told policymakers that trade policy uncertainty
“has discouraged them from investing in their businesses.” The Fed cut interest
rates again last Wednesday after lowering borrowing costs in July for the first
time since 2008. Business investment declined at a 1.0% annualized rate last
quarter, the biggest drop since the fourth quarter of 2015, the government
reported on Thursday. Weak business investment is underscored by manufacturing,
where output has contracted for two straight quarters. Manufacturing, which
accounts for about 11% of the economy, is also being undercut by weak global
demand and design problems at planemaker Boeing. Last month, orders for
electrical equipment, appliances and components dropped 1.3%, the most since
November 2018. There were also decreases in orders for computers and electronic
products. But orders for machinery rebounded 0.6%. There were also gains in
orders for primary metals and fabricated metal products. Overall orders for
durable goods, items ranging from toasters to aircraft that are meant to last
three years or more, rose 0.2% in August after surging 2.0% in the prior month.
Orders for transportation equipment fell 0.4% after jumping 7.2% in July. Motor
vehicles and parts orders decreased 0.8% last month. Orders for non-defense
aircraft and parts tumbled 17.1%. Boeing reported on its website that it had
received only six aircraft orders in August after getting 31 orders in July.