WASHINGTON: New orders for US-made capital goods increased by the most in eight months in March, hitting their highest level on record and brightening the outlook for manufacturing and the economy.
While other data on Thursday showed the number of Americans filing claims for unemployment benefits last week was the largest in 19 months, that did not change views of a tightening labour market that is increasingly running out of workers. The reports underscored the economy’s enduring strength as it prepares to celebrate a record 10 years of growth in July.
“Company CEOs may have feared recession in surveys taken at the start of the year, but those concerns have faded as businesses bring on new equipment to meet the demand for the goods and services they provide their customers,” said Chris Rupkey, chief economist at MUFG in New York.
The Commerce Department said orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.3 per cent to an all-time high of $70.0 billion, powered by a jump in demand for computers and electronic products.
The increase in these so-called core capital goods orders was the biggest since last July and followed a 0.1 per cent gain in February. Economists polled by Reuters had forecast core capital goods orders only nudging up 0.1 per cent in March. They increased 2.8 per cent on a year-on-year basis.
But shipments of core capital goods slipped 0.2 per cent in March after gaining 0.2 per cent in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.
While March’s drop in shipments suggested business spending on equipment slowed down in the first quarter that did not have an impact on economists’ growth estimates for the period.
According to a Reuters survey of economists, gross domestic product probably increased at a 2.0 per cent annualised rate in the first quarter. The economy grew at a 2.2 per cent pace in the October-December period. The government will publish its snapshot of first-quarter GDP on Friday.
Business spending on equipment is expected to have slowed because of the delayed impact of sharp drops in oil prices towards the end of 2018 and fading depreciation provisions in the 2018 tax bill, as well as supply chain disruptions caused by Washington’s trade war with China.
The dollar rose to a near two-year high against the euro, while US Treasury prices fell. Stocks on Wall Street were trading lower amid a mixed batch of corporate earnings.
In March, orders for machinery rose 0.3 per cent after declining 0.7 per cent in February. Orders for computers and electronic products soared 2.2 per cent. There were also increases in orders for electrical equipment, appliances and components. But orders for primary metals fell, as did those for fabricated metal products. — Reuters
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