Rise in Business Equipment Orders Signals Steady Investment
An increase in U.S. orders for business equipment last month and the biggest gain since February in such sales indicate improving demand at the start of the third quarter, Commerce Department data showed Aug. 25.
Highlights of July Durable Goods Report
• Non-military capital goods orders excluding aircraft rose 0.4% (matching estimate) after little change in prior month.
• Shipments of those goods, which are used to calculate gross domestic product, jumped 1% (estimated 0.2% gain) after an upwardly revised 0.6% advance (previous 0.1% increase).
• Bookings for all durable goods slumped 6.8% (estimated 6% decline), most since August 2014, following 6.4% increase.
• Excluding transportation-equipment demand, which is volatile, orders rose 0.5% after climbing 0.1%.
Key Takeaways
The pickup in core capital goods shipments and orders, along with an upwardly revised gain in June sales, suggests the equipment numbers that feed into GDP calculations were improving at the start of the second half of the year.
That also indicates that economic growth has the potential to broaden out beyond household spending.
Steady consumer demand is helping to underpin business optimism, and growth in overseas markets along with a weaker dollar may provide a boost to exports, further strengthening the outlook for manufacturing.
A plunge in aircraft orders probably played a big role in pushing down total bookings for durable goods: Boeing Co., the Chicago-based aerospace company, said it received 22 orders for aircraft in July, down from 184 the prior month.
Other Details
• Orders for motor vehicles and parts dropped 1.2%, the largest drop since May 2016 and reflecting weak sales.
• Orders for fabricated metals rose 1%, while those for computers and electronic products climbed 1.6%.
• Electrical equipment and appliances orders rose 2.6%.
• Bookings for civilian aircraft and parts slumped 70.7% after a 129.3% surge; defense capital-goods orders advanced 14.7%.
• Durable goods inventories rose 0.3%.
