U.S. Business-Equipment Orders Show First Decline in Five Months

(Bloomberg) -- Orders placed with U.S. factories for business equipment unexpectedly declined in August, the first drop in five months, marking a pause from solid gains in manufacturing, Commerce Department figures showed Thursday.

Highlights of Durable Goods (August)

  • Non-military capital goods orders excluding aircraft fell 0.5% m/m (est. 0.4% rise) after climbing 1.5% the prior month; figure is proxy for business investment
  • Shipments of those goods, used to calculate gross domestic product, rose 0.1% (est. 0.5% increase) after 1.1% advance
  • Broader measure of bookings for all durable goods, or items meant to last at least three years, jumped 4.5% (est. 2% gain), most since Feb., following 1.2% decrease; reflects large rebounds in aircraft orders, military bookings

Key Takeaways

While the monthly data on business-equipment orders are typically volatile, and August’s dip follows a strong July, analysts are watching for signs that a widening trade war is spurring companies to slow investment. Corporations have cited risks from higher prices for steel and aluminum, with Ford Motor Co. saying that metals tariffs reduced its profits by $1 billion. General Motors Corp. has also cited higher metals costs as dimming its outlook.

A more persistent slowdown in business spending would weigh on what’s expected to be a solid second half for the economy, after corporate investment, boosted by tax cuts, supported expansion earlier this year. The Commerce Department’s third and final gross domestic product estimate for the second quarter showed an unrevised annualized pace of 4.2 percent growth, the fastest since 2014, according to a separate report on Thursday.

The broader jump in durable-goods orders in August reflects bookings for civilian aircraft and parts, also a volatile category, which surged 69.1 percent after a 29.1 percent drop in July. Boeing Co. previouslyreported that the planemaker received 99 orders in August, up from 25 in July.

U.S. Business-Equipment Orders Show First Decline in Five Months

Other Details
  • Excluding transportation items, durable-goods orders rose 0.1 percent, less than forecasts for 0.4 percent, after a revised 0.2 percent gain
  • Orders for primary metals rose 0.9 percent, fabricated metal products unchanged, machinery up 0.1 percent
  • Bookings for motor vehicles and parts fell 1 percent; communications equipment up 0.7 percent, computers and related products down 0.8 percent
  • Defense capital-goods orders jumped 44.4 percent, most since February
  • Durable goods inventories fell 0.4 percent, biggest drop since June 2016

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