Drop in May Orders for U.S. Capital Goods Follows April Jump

Drop in May Orders for U.S. Capital Goods Follows April Surge

Shobhana Chandra

28 Jun 2018, 12:03 AM IST

(Bloomberg) -- Orders placed with U.S. factories for business equipment cooled unexpectedly in May after an upwardly revised April jump that was the largest this year, indicating resilient demand, Commerce Department figures showed Wednesday.

Highlights of Durable Goods (May)
Non-military capital goods orders excluding aircraft fell 0.2% (est. 0.5% gain) after surging 2.3% the prior month (prev. 1%); figure is proxy for business investment Shipments of those goods, used to calculate gross domestic product, dipped 0.1% (est. 0.3% increase) after a revised 1% increase (prev. 0.9%) Bookings for all durable goods, or items meant to last at least three years, fell 0.6% (est. 1% decline) following a revised 1% decrease

Highlights of Durable Goods (May)

Non-military capital goods orders excluding aircraft fell 0.2% (est. 0.5% gain) after surging 2.3% the prior month (prev. 1%); figure is proxy for business investment
Shipments of those goods, used to calculate gross domestic product, dipped 0.1% (est. 0.3% increase) after a revised 1% increase (prev. 0.9%)
Bookings for all durable goods, or items meant to last at least three years, fell 0.6% (est. 1% decline) following a revised 1% decrease

Key Takeaways

While the figures are typically volatile, the latest data signal the underlying trend in business investment remains firm in the face of uncertainty related to U.S. tariffs. Orders for machinery and communications equipment increased in May.

Growth in business spending, which is getting a boost from lower corporate taxes, will be an additional source of support for the projected pickup in second-quarter economic growth primarily driven by consumer purchases.

Higher input costs, and uncertainty related to escalating threats of tit-for-tat tariffs between the U.S. and its trade partners, however, represent risks to the outlook.

Total bookings were beset by a slump in transportation equipment. Orders for motor vehicles slumped 4.2 percent in May, the biggest decrease since January 2015. Aircraft orders also depressed total bookings. Boeing Co., the Chicago-based aerospace company, said it received 43 orders for aircraft in May, down from 78 the prior month.

Drop in May Orders for U.S. Capital Goods Follows April Jump

Other Details

Orders for machinery climbed 0.3 percent after a 1.7 percent increase
Communications equipment orders rose 5.7 percent after a 3.9 percent gain
After surging in recent months, orders for primary and fabricated metals declined in May
Bookings for civilian aircraft and parts fell 7 percent; defense capital-goods orders jumped 15.1 percent
Excluding transportation-equipment demand, which is volatile, orders fell 0.3 percent after jumping 1.9 percent
Durable goods inventories rose 0.3 percent for a second month

--With assistance from Chris Middleton.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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