LDN - Business

U.S. core capital goods orders slip, but shipments maintain upward trend

[July 27, 2017] WASHINGTON (Reuters) - New orders for key U.S.-made capital goods unexpectedly fell in June, but a fifth straight monthly increase in shipments suggested that business spending on equipment supported economic growth in the second quarter.

The Commerce Department said on Thursday that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, slipped 0.1 percent last month. That was the first drop since December and followed an upwardly revised 0.7 percent jump in May.

May's increase in these so-called core capital goods orders was the biggest since January. Core capital goods orders were previously reported to have gained 0.2 percent in May.

Economists polled by Reuters had forecast core capital goods orders rising 0.3 percent last month.

Shipments of core capital goods increased 0.2 percent after rising 0.4 percent in May. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

They have risen for five straight months. Business spending on equipment added 0.42 percentage point to the economy's 1.4 percent annualized growth pace in the first quarter.

The government will publish its advance second-quarter GDP estimate on Friday. The increase in equipment spending has mostly been driven by the energy sector, where oil and gas drilling has increased significantly after declining in the aftermath of the collapse in crude oil prices.

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A production line employee works at the AMES Companies shovel manufacturing factory in Camp Hill, Pennsylvania, U.S. on June 29, 2017. REUTERS/Tim Aeppel

The energy sector recovery is helping to support manufacturing by offseting some of the drag from declining motor vehicle production. Manufacturing accounts for about 12 percent of the U.S. economy.

Last month, orders for machinery increased 0.2 percent, but shipments were unchanged.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, surged 6.5 percent last month as bookings for civilian aircraft soared 131.2 percent.

The increase in durable goods orders was the largest since July 2014 and followed a 0.1 percent dip in May.

Boeing <BA.N> reported on its website that it had received 184 aircraft orders in June compared with only 13 in May.

Orders for motor vehicles and parts fell 0.6 percent in June after rising 1.6 percent in May. There were also declines in orders for computers and electronic products as well as electrical equipment, appliances and components.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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