Stagnant Equipment Orders Signal Pause in Investment
A second straight month of stagnant orders for business equipment in April indicates investment in capital goods could slow in the second quarter, Commerce Department data showed May 26.
Highlights of Durable Goods Report (April)
• Orders for nonmilitary capital goods excluding aircraft unchanged (forecast 0.5% gain) after March revised down to no change.
• Shipments of such capital equipment, used to calculate GDP, fell 0.1% (forecast 0.5% gain) after revised 0.2% gain.
• Bookings for all durable goods fell 0.7% (forecast 1.5% drop) after a revised 2.3% increase.
• Excluding demand for transportation equipment, which is volatile, orders dropped 0.4% after 0.8% gain in prior month.
Key Takeaways
The figures on orders and shipments may raise concern that a pickup in first-quarter business investment was temporary.
The data may also indicate that companies may be growing reluctant to move forward on expansion plans until lawmakers in Washington come to an agreement on tax legislation and infrastructure spending. Orders dropped in April for machinery, fabricated metals and electrical equipment.
A separate release from the Commerce Department on gross domestic product showed business investment in equipment rose an annualized 7.2% in the first quarter, the most since the third quarter 2015.
Other Details
• Orders for motor vehicles and parts rose 0.3% in April; consistent with industry data showing a small pickup in the pace of auto sales.
• Orders for fabricated metal products fell 0.9%, while bookings for machinery declined 0.8%.
• Demand for electrical equipment and appliances slumped 1.7%; orders for computers and electronic products increased 1.4%.
• Bookings for civilian aircraft and parts fell 9.2%; defense capital-goods orders rose 4.2%.
• Durable goods inventories rose 0.1%; unfilled orders for nondefense capital goods excluding aircraft were up 0.1% for a second month.
