LDN - Business

U.S. core capital goods orders, shipments surge in February

[March 23, 2018] WASHINGTON(Reuters) - New orders for key U.S.-made capital goods rebounded more than expected in February after two straight monthly declines and shipments surged, pointing to strong growth in business spending on equipment in the first quarter.

The Commerce Department said on Friday orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 1.8 percent last month. That was the biggest gain in five months and followed a downwardly revised 0.4 percent decrease in January.

Economists polled by Reuters had forecast those orders rising only 0.8 percent last month after a previously reported 0.3 percent decline in January. Core capital goods orders increased 7.4 percent on a year-on-year basis.

Shipments of core capital goods increased 1.4 percent in February, the biggest advance since December 2016, after an upwardly revised 0.1 percent gain in January. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

They were previously reported to have slipped 0.1 percent in January. Business spending on equipment powered ahead in 2017 as companies anticipated a hefty reduction in the corporate income tax rate. The Trump administration slashed that rate to 21 percent from 35 percent effective in January.

The surge in core capital goods orders in February suggests further gains. Investment in equipment is likely to be bolstered by robust business confidence, strengthening global economic growth and a weakening dollar, which is boosting demand for U.S. exports.

That is helping to support manufacturing, which accounts for about 12 percent of U.S. economic activity.

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Containers are stacked on a ship at the Port in Bayonne, New Jersey during a work stoppage in the harbor of New York January 29, 2016. REUTERS/Brendan McDermid

The strength in core capital goods shipments could help offset the impact of soft consumer spending on first-quarter growth. The Atlanta Federal Reserve is forecasting gross domestic product increasing at a 1.8 percent annualized rate in the first three months of the year.

The government reported last month that the economy grew at a 2.5 percent pace in the fourth quarter.

Last month, orders for machinery soared 1.6 percent. There were also hefty increases in orders of primary metals and electrical equipment, appliances and components. Orders for computers and electronic products fell 0.2 percent.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, vaulted 3.1 percent last month as demand for transportation equipment soared 7.1 percent. That followed a 3.5 percent tumble in January.

Boeing <BA.N> reported on its website that it received 30 aircraft orders in February compared to 28 in January.

Orders for motor vehicles and parts increased 1.6 percent last month after edging up 0.1 percent in January.

(Reporting by Lucia Mutikani Editing by Paul Simao; Lucia.Mutikani
@thomsonreuters.com;
1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com
@reuters.net)

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