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U.S. Business-Equipment Orders Jump by Most Since Early 2018

Orders placed with U.S factories for business equipment posted the biggest gain in over a year, shipments jumped unexpectedly.

U.S. Business-Equipment Orders Jump by Most Since Early 2018
Employees works on the line at the Ford Motor Co. Dearborn Truck Plant in Dearborn, Michigan, U.S. (Photographer: Sean Proctor/Bloomberg)

(Bloomberg) -- Orders placed with U.S. factories for business equipment posted the biggest gain in more than a year and shipments unexpectedly increased, suggesting corporate investment is regaining momentum despite tariffs and global weakness.

A proxy for business investment -- non-military capital-goods orders excluding aircraft -- jumped 1.9% in June after a downwardly revised 0.3% increase in the prior month, according to Commerce Department figures Thursday that topped estimates. A separate Labor Department report showed filings for unemployment benefits fell last week to a three-month low, indicating the job market remains tight.

U.S. Business-Equipment Orders Jump by Most Since Early 2018

Key Insights

  • The largest increase in equipment orders since February 2018 was broad-based and could ease concerns that the trade war with China and weakening global growth risk a deeper slowdown in the U.S. economy. Such strength, along with recent data showing firm consumer spending and job gains, may dissuade the Federal Reserve from continuing to cut interest rates after a widely anticipated quarter-point reduction next week.
  • Shipments of business equipment also rose from the prior month, compared with projections for a drop, suggesting second-quarter gross domestic product due Friday may be better than previously expected, though other data Thursday indicated trade and inventories may be a bigger drag. Analysts had projected an annualized GDP growth rate of 1.8%, down from 3.1% in the first three months of the year, on slowing business investment and a drag from inventories.
  • U.S. trade negotiators are set to travel to China next week and meet for the first time since talks broke down in May, signaling some progress in reaching a deal between the world’s two largest economies.
  • The broader measure of bookings for all durable goods, or items meant to last at least three years, advanced by more than forecast, reflecting an increase in civilian aircraft and parts orders. Boeing Co. booked nine aircraft orders in June following none in May, amid a global flying ban on its 737 Max jets after two fatal crashes. The company said it may temporarily halt production of the model.

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  • Labor Department figures showed initial jobless claims declined by 10,000 to 206,000 in the week ended July 20. That’s the lowest level since mid-April and near a half- century low. Continuing claims also fell to a five-week low.
  • Shipments of non-military capital goods excluding aircraft -- a measure used in GDP calculations -- rose 0.6% after a 0.5% increase. The three-month annualized gain increased to 2.4% from 1.5%, while for orders it cooled to 0.3% from 1.6%.
  • Most categories of goods showed increases in orders, with machinery up the most since February 2018 and communications equipment rising the most since March of this year. Bookings for motor vehicles and parts posted the largest gain since July 2018.
  • Excluding transportation-equipment demand, which tends to be volatile, durable-goods orders rose 1.2% after a 0.5% gain. Defense capital-goods orders fell 16.3%.

--With assistance from Jordan Yadoo.

To contact the reporter on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net

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

©2019 Bloomberg L.P.