U.S. Business-Equipment Orders Unexpectedly Drop in December

(Bloomberg) --

Orders for U.S. capital equipment unexpectedly declined in December, capping a year of subdued business investment that weighed on the expansion last year.

Bookings for non-military capital goods orders excluding aircraft -- a proxy for business investment -- fell 0.9% after a 0.1% gain in the prior month, according to Commerce Department data Tuesday. That fell short of all estimates in a Bloomberg survey of economists that had called for a gain.

While December’s figures ended 2019 on a more downbeat note, capital equipment orders for the full year rose 0.8% on an unadjusted basis, to $827 billion.

Key Insights

• The latest data add to signs of lackluster corporate investment amid weaker overseas demand and trade uncertainty with China, though tensions have cooled. Business investment weighed on growth in both the second and third quarters, and gross domestic product data due Thursday will show whether the trend endured at year-end.
• The broader measure of bookings for all durable goods, or items meant to last at least three years, increased 2.4%, the most since August 2018, boosted by the best gain in more than a year for the volatile transportation equipment category. Transportation orders were up 7.6% last month following an 8.3% drop in November.
• Recent manufacturing data have underscored the sector’s struggle to regain its footing amid several headwinds. The Federal Reserve’s measure of factory output capped an otherwise sluggish year with a December gain, and the Institute for Supply Management manufacturing gauge fell last month to the lowest level in more than a decade.

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• Shipments of non-defense capital goods excluding aircraft - - a measure used in gross domestic product calculations -- dropped 0.4%, also missing estimates for an advance. The report showed the three-month annualized pace of business- equipment shipments was down 0.7% in December versus a 2.9% decline in November.
• Excluding transportation equipment, orders slipped 0.1%.
• Durable goods inventories rose 0.5% following a 0.4% increase in the prior month.

--With assistance from Chris Middleton.

To contact the reporter on this story: Reade Pickert in Washington at epickert@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns

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