U.S. core capital goods orders dip, shipments increase
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[December 22, 2017]
WASHINGTON, Dec 22 (Reuters) - New orders
for key U.S.-made capital goods fell in November after four straight
months of increases, but further gains in shipments suggested that
business spending on equipment will probably remain robust in the fourth
quarter.
The Commerce Department said on Friday that orders for non-defense
capital goods excluding aircraft, a closely watched proxy for business
spending plans, slipped 0.1 percent last month. Data for October was
revised to show these so-called core capital goods orders jumping 0.8
percent instead of the previously reported 0.3 percent gain.
Economists polled by Reuters had forecast orders of these so-called core
capital goods increasing 0.5 percent last month. Core capital goods
orders gained 5.1 percent on a year-on-year basis.
November's dip is likely to be temporary after Republicans in the U.S.
Congress passed a tax cut package worth $1.5 trillion, the largest
overhaul of the tax code in 30 years.
The package, which slashes the corporate income tax rate to 21 percent
from 35 percent, is a major legislative victory for President Donald
Trump. The Trump administration argues that the tax cut will boost
business spending though many economists believe companies will use much
of the windfall on share buy-backs and debt reduction.
Last month, shipments of core capital goods rose 0.3 percent after an
upwardly revised 1.3 percent surge in October. Core capital goods
shipments are used to calculate equipment spending in the government's
gross domestic product measurement.
They were previously reported to have jumped 1.1 percent in October. The
increase in core capital goods shipments over the last two months suggested a
strong pace of increase in business spending on equipment in the fourth quarter.
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Business investment in equipment rose at its fastest pace in three years in the
third quarter, helping to power the economy to a 3.2 percent annualized growth
pace during that period.
Strong business spending on equipment is helping to boost manufacturing, which
accounts for about 12 percent of the U.S. economy. Last month, orders for
machinery tumbled 1.1 percent.
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Orders for electrical equipment, appliances and components increased 0.7
percent. There were also increases in orders for primary metals. Orders for
computers and electronic products fell as did those for fabricated metal
products.
Overall orders for durable goods, items ranging from toasters to aircraft meant
to last three years or more, rebounded 1.3 percent last month as demand for
transportation equipment surged 4.2 percent. Durable goods orders fell 0.4
percent in October.
Boeing BA.N reported on its website that it received 159 aircraft orders in
November compared to only 64 in October.
Orders for motor vehicles and parts increased 1.4 percent last month after
shooting up 1.6 percent in October.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci) ((Lucia.Mutikani@thomsonreuters.com;
1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.
com@reuters.net)
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