Weak U.S. core capital
goods orders point to subdued business spending
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[June 24, 2016]
WASHINGTON, (Reuters) - New orders
for U.S. manufactured capital goods unexpectedly fell in May as demand
declined across the board, suggesting business spending will remain a
drag on economic growth in the second quarter.
The Commerce Department said on Friday non-defense capital goods orders
excluding aircraft, a closely watched proxy for business spending plans,
fell 0.7 percent last month after a revised 0.4 percent decline in
These so-called core capital goods orders were previously reported to
have dropped 0.6 percent in April. Economists polled by Reuters had
forecast core capital goods orders increasing 0.3 percent.
Overall orders for durable goods, items ranging from toasters to
aircraft that are meant to last three years or more, declined 2.2
percent last month after a downwardly revised 3.3 percent increase in
April. Durable goods orders were previously reported to have risen 3.4
percent in April.
There is little sign of reprieve for the manufacturing sector, which has
been hurt by the lingering effects of the dollar's surge between June
2014 and December 2015, and sluggish global demand, which have eroded
The sector, which accounts for about 12 percent of the U.S. economy, has
also been weighed down by lower oil prices, which have undercut profits
of energy companies and forced deep cuts in capital spending budgets.
Business spending on equipment has declined over the last two quarters. It
dropped in the first quarter at its quickest pace since the second quarter of
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The CAT logo is seen on the bucket of a Caterpillar machine on a lot
at Milton CAT in North Reading, Massachusetts January 23, 2013.
With core capital goods orders falling for a second straight month in May,
spending on equipment will likely remain a drag on economic growth in the second
Shipments of core capital goods, which are used to calculate equipment spending
in the government's gross domestic product measurement, slipped 0.5 percent last
month after an upwardly revised 0.6 percent rise in April.
Core capital goods shipments were previously reported to have increased 0.4
percent in April. Economists say uncertainty over the global economy and the
upcoming U.S. presidential elections are making businesses cautious about
((Reporting by Lucia Mutikani; Editing by Andrea Ricci))
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