Arab Times

US durable goods and trade data boost second qtr growth estimate

Retail, wholesale inventorie­s increase 0.6 pct

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WASHINGTON, July 27, (RTRS): Shipments of key US-made capital goods increased in June for a fifth straight month, suggesting that business spending on equipment helped to boost economic growth in the second quarter.

Signs that the economy gathered speed in the last quarter were also bolstered by other data on Thursday showing a sharp narrowing in the goods trade deficit in June and increases in both retail and wholesale inventorie­s.

The bullish reports came on the eve of the government’s advance secondquar­ter gross domestic product estimate on Friday, prompting economists to raise their forecasts to as high as a 3.5 percent annualized rate. The economy grew at a 1.4 percent pace in the first quarter.

“The economy still has legs in this long expansion from the end of the recession. The only risk we see is that the economy is running out of workers to do the heavy lifting and make us grow,” said Chris Rupkey, chief economist at MUFG in New York.

The Commerce Department said shipments of non-defense capital goods orders excluding aircraft increased 0.2 percent after rising 0.4 percent in May.

Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measuremen­t.

But core capital goods orders, a closely watched proxy for business spending plans, slipped 0.1 percent last month, suggesting equipment spending could moderate in the months ahead. June’s drop was the first since December and followed a 0.7 percent jump in May, which was the biggest gain since January.

Rose

Prices for US Treasuries were trading lower, while the dollar rose against a basket of currencies. US stocks rose to new record highs, also cheered by better-than-expected profits from Facebook and Verizon.

The increase in equipment spending has mostly been driven by the energy sector, where oil and gas drilling has increased significan­tly after declining in the aftermath of the collapse in crude oil prices.

Momentum is, however, slowing as drilling activity cools. The energy sector recovery is supporting manufactur­ing by offsetting some of the drag from declining motor vehicle production. Manufactur­ing accounts for about 12 percent of the US economy.

In other data on Thursday, the Commerce Department said the goods trade deficit fell 3.7 percent to $63.9 billion in June amid a rise in exports. Goods exports increased $1.8 billion to $128.6 billion last month.

Imports of goods fell $0.7 billion to $192.4 billion. Separately, both retail and wholesale inventorie­s increased 0.6 percent in June. A smaller goods trade deficit and increased stock accumulati­on are a boost to GDP growth.

However, rising inventorie­s could weigh on economic growth in the coming quarters.

“Stockpilin­g is not always good news for the economy. If the accumulati­on of inventorie­s is in anticipati­on of a quickening demand environmen­t, that is generally positive,” said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“If it is a result of product simply not moving because demand is drying up, that clearly is not a good signal.”

While another report from the Labor Department on Thursday showed initial claims for state unemployme­nt benefits increased 10,000 to a seasonally adjusted 244,000 for the week ended July 22, layoffs remain low and are consistent with a tightening labor market.

Claims have now been below 300,000, a threshold associated with a robust labor market for 125 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at 4.4 percent.

Claims are volatile around this time of the year as automakers shut assembly plants for annual retooling. Some manufactur­ers like General Motors are extending their summer shutdowns to manage excess inventory from falling sales.

 ??  ?? President Donald Trump, accompanie­d by Wisconsin Gov Scott Walker (left), Vice President Mike Pence, House Speaker Paul Ryan of Wisconsin, and Sen Ron Johnson R-Wisconsin, speaks in the East Room of the
White House in Washington on July 26. (AP)
President Donald Trump, accompanie­d by Wisconsin Gov Scott Walker (left), Vice President Mike Pence, House Speaker Paul Ryan of Wisconsin, and Sen Ron Johnson R-Wisconsin, speaks in the East Room of the White House in Washington on July 26. (AP)

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