U.S. Core Capital Goods Orders Beat Expectations; Business Investment Rebounding
New orders for key U.S.-made capital goods increased more than expected in August and demand for the prior month was stronger than previously estimated, suggesting a rebound in business spending on equipment was underway after a prolonged slump. The upbeat report from the Commerce Department on September 25, however, did not change views that the economy’s recovery from the COVID-19 recession was slowing as government money to help businesses and tens of millions of unemployed Americans runs out. New coronavirus cases are rising in some parts of the country. That could crimp consumer spending, with retail sales already slowing.
Federal Reserve Chair Jerome Powell stressed the need for more fiscal stimulus, telling lawmakers on September 22 that it could make the difference between continued recovery and a much slower economic slog. Another rescue package appears unlikely before the November 3 presidential election.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 1.8% last month, the Commerce Department said. Data for July was revised up to show these so-called core capital goods orders increasing 2.5% instead of 1.9% as previously estimated. Economists polled by Reuters had forecast core capital goods orders gaining 0.5% in August.
Core capital goods orders last month were boosted by increased demand for machinery, primary metals, computers and electronic products. But orders for fabricated metal products and electrical equipment, appliances and components fell. Shipments of core capital goods increased 1.5% last month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. They advanced 2.8% in July. Business investment tumbled at a record 26% annualized rate in the second quarter, with spending on equipment collapsing at an all-time pace of 35.9%. Investment in equipment has contracted for five straight quarters. Source: Reuters, 09.25.2020
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