Core capital goods orders dip, but shipments surge

[March 24, 2017]  WASHINGTON, March 24 (Reuters) - - New orders for key U.S.-made capital goods unexpectedly fell in February, but a surge in shipments amid demand for machinery and electrical

equipment supported expectations for an acceleration in business investment in the first quarter.

The Commerce Department said on Friday that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dipped 0.1 percent last month after rising 0.1 percent in January.

Shipments of these so-called core capital goods jumped 1.0 percent after declining 0.3 percent in January. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

Economists polled by Reuters had forecast core capital goods orders rising 0.6 percent last month. Orders for machinery inched up 0.1 percent while shipments increased 0.9 percent.

Orders for electrical equipment, appliances and components advanced 2.2 percent, the biggest increase in seven months, and shipments rose 1.5 percent.

A recovery in oil prices from multi-year lows is driving demand for equipment in the energy sector, helping to lift the manufacturing sector.

Manufacturing, which accounts for about 12 percent of the U.S. economy is also being underpinned by a burst of confidence amid promises by the Trump administration to slash taxes for businesses, boost infrastructure spending and repeal some regulations.

The Federal Reserve last week escribed business investment as appearing to have "firmed somewhat." Economists expect business spending on equipment to pick up in the first quarter after a 1.9 percent annualized growth pace in the fourth quarter. Still, that will likely be insufficient to offset the drag on GDP from slower consumer spending and a wider trade deficit.

Containers are seen stacked up at the ports of Los Angeles and Long Beach, California February 6, 2015 in this aerial image. REUTERS/Bob Riha Jr

The Atlanta Fed is forecasting the economy growing at a 0.9 percent rate in the first quarter after expanding at a 1.9 percent pace in the final three months of 2016.

Last month, a 4.3 percent jump in demand for transportation equipment offset the dip in core capital goods bookings, and hoisted overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, 1.7 percent.

Durable goods orders had increased 2.3 percent in January. Civilian aircraft orders soared 47.6 percent in February.

Boeing reported on its website that it had received orders for 43 aircraft last month, up from 26 in January.

Orders for motor vehicles and parts fell 0.8 percent in February, while orders for defense aircraft declined 12.8 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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