US core capital goods orders flat; housing market weak

WASHINGTON: New orders for key US-made capital goods were unexpectedly unchanged in October and shipments rebounded modestly, which could temper expectations of an acceleration in business spending on equipment early in the fourth quarter.
While other data on Wednesday showed home resales rising last month after six straight monthly declines, house purchases remained sharply down this year. Sluggish business spending on equipment together with a lackluster housing market could stoke fears that higher interest rates are hurting the economy. There was also disappointing news on the labour market. The number of Americans filing applications for unemployment benefits rose to more than a four-month high last week.
“The economy may have seen its best day already for growth and prosperity back a couple of months ago in late summer,” said Chris Rupkey, chief economist at MUFG. “Winter is coming for the economic outlook where business investment spending looks to be topping out, and companies have let a few workers go.”
The Commerce Department said the flat reading in orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, followed a downwardly revised 0.5 per cent drop in September.
These so-called core capital goods orders were previously reported to have dipped 0.1 per cent in September.
Last month, there were declines in orders for primary metals and machinery. That offset increases in orders for fabricated metal products, computers and electronic products, as well as electrical equipment, appliances and components.
Economists polled by Reuters had forecast core capital goods orders rising 0.2 per cent last month. Core capital goods orders increased 6.4 per cent on a year-on-year basis.
Shipments of core capital goods rose 0.3 per cent in October after a downwardly revised 0.2 per cent drop in the prior month.
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 per cent in September. Business spending on equipment stalled in the third quarter and is faltering despite the Trump administration’s $1.5 trillion tax cut.
Some companies including Apple Inc used their tax windfall to buy back shares on a massive scale. Spending on equipment could also be undercut by declining oil prices. Brent crude has dropped about 28 per cent since early October amid rising concerns about slowing global growth. — Reuters