US core capital goods orders fall sharply in May
WASHINGTON, June 27 (Reuters) -New orders for key U.S.-manufactured capital goods unexpectedly fell in May, suggesting that business spending on equipment weakened in the second quarter as borrowing costs remain elevated.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.6% last month, the Commerce Department's Census Bureau said on Thursday. Data for April was revised slightly higher to show these so-called core capital goods orders rising 0.3% instead of 0.2% as previously reported.
Economists polled by Reuters had forecast core capital goods orders edging up 0.1%.
Business spending on equipment is under pressure from higher interest rates and softening demand for goods.
A survey from the Institute for Supply Management early this month noted that "demand remains elusive as companies demonstrate an unwillingness to invest due to current monetary policy and other conditions."
The Federal Reserve has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July. Financial markets expect the U.S. central bank to start its easing cycle in September, though policymakers recently adopted a more hawkish outlook. The Fed has hiked its policy rate by 525 basis points since 2022 to quell inflation.
Core capital goods shipments dropped 0.5% after rising 0.4% in April. Non-defense capital goods orders decreased 0.9%, falling for a second straight month. Shipments of these goods tumbled 1.5% after increasing 2.1% in April. These shipments go into the calculation of the business spending on equipment component in the gross domestic product report.
Business spending on equipment rose marginally in the first quarter, making a tiny contribution to the economy's 1.4% annualized growth pace during that period.
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, edged up 0.1% in May after a downwardly revised 0.2% gain in April.
Durable goods orders were previously reported to have advanced 0.6% in April. Transportation orders rose 0.6%, reflecting a 0.7% increase in motor vehicle orders.
Commercial aircraft orders fell 2.8%. Boeing BA.N reported on its website that it had received only four orders for aircraft last month compared to seven in April.
The planemaker has been beset by problems, inviting scrutiny from regulators and customers since a Jan. 5 incident in which a smaller 737 MAX operated by Alaska Airlines was forced to make an emergency landing after a fuselage panel blew out mid-flight.
There were decreases in orders for machinery, primary metals as well as electrical equipment, appliances and components. Orders for computers and electronic products nudged up 0.1%.
Reporting by Lucia Mutikani; Editing by Andrea Ricci
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
