U.S. core capital goods orders post biggest drop in a
year
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[November 22, 2017]
WASHINGTON, (Reuters) - New orders for key
U.S.-made capital goods unexpectedly fell in October after three
straight months of hefty gains, but a sustained increase in shipments
pointed to strong momentum in the economy as the year winds down.
The Commerce Department said on Wednesday that orders for non-defense
capital goods excluding aircraft, a closely watched proxy for business
spending plans, declined 0.5 percent last month. That was the biggest
drop since September 2016 and followed an upwardly revised 2.1 percent
increase in September.
Economists polled by Reuters had forecast orders of these so-called core
capital goods increasing 0.5 percent last month after a previously
reported 1.7 percent jump in September. Core capital goods orders rose
4.4 percent on a year-on-year basis.
Shipments of core capital goods advanced 0.4 percent last month after
accelerating by 1.2 percent in September. Core capital goods shipments
are used to calculate equipment spending in the government's gross
domestic product measurement.
Core capital goods shipments have been increasing since February, in
part fueled by expectations that President Donald Trump and his fellow
Republicans in Congress will push through hefty corporate tax cuts.
Republicans in the House of Representatives last week approved a broad
package of tax cuts, including an immediate reduction in the corporate
income tax rate to 20 percent from 35 percent. Their colleagues in the
Senate are advancing their own tax bill, which would also lower
corporate taxes by the same rate but delay the reduction by one year.
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U.S. made plywood is shown for sale in Los Angeles, California,
U.S., April 26, 2017. REUTERS/Mike Blake
Business spending on equipment has buoyed economic growth for the past four
quarters and is expected to make a solid contribution to GDP in the
October-December 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 increased 0.6 percent. Orders for electrical equipment, appliances and
components climbed 0.8 percent. There were also increases in orders for primary
metals and computers and electronic products.
Overall orders for durable goods, items ranging from toasters to aircraft meant
to last three years or more, fell 1.2 percent last month as demand for
transportation equipment tumbled 4.3 percent. Durable goods orders increased 2.2
percent in September.
Boeing <BA.N> reported on its website that it received 64 aircraft orders in
October, down from 72 in the prior month.
Orders for motor vehicles and parts rebounded 1.7 percent last month after
slipping 0.1 percent in September.
((Reporting by Lucia Mutikani; Editing by Paul Simao))
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