Arab Times

US core capital goods fall; business spending momentum up

Weekly jobless claims drop by 13,000

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WASHINGTON, Nov 22, (RTRS): New orders for key US-made capital goods unexpected­ly fell in October after three straight months of hefty gains, but a sustained increase in shipments pointed to robust business investment and economic momentum as the year winds down.

The economy’s prospects were bolstered by other data on Wednesday showing a decline in the number of Americans filing claims for unemployme­nt benefits. Strong business investment and tightening labor market conditions will likely keep the Federal Reserve on track to raise interest rates next month.

The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, declined 0.5 percent last month. That was the biggest drop since September 2016 and followed an upwardly revised 2.1 percent increase in September.

Economists polled by Reuters had forecast orders of these so-called core capital goods increasing 0.5 percent last month after a previously reported 1.7 percent jump in September. Core capital goods orders rose 4.4 percent on a year-on-year basis.

Shipments of core capital goods advanced 0.4 percent last month after accelerati­ng by 1.2 percent in September. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measuremen­t.

Core capital goods shipments have been increasing since February, in part fueled by expectatio­ns that President Donald Trump and his fellow Republican­s in Congress will push through hefty corporate tax cuts.

Republican­s in the House of Representa­tives last week approved a broad package of tax cuts, including an immediate reduction in the corporate income tax rate to 20 percent from 35 percent. Their colleagues in the Senate are advancing their own tax bill, which would also lower corporate taxes by the same rate but delay the reduction by one year.

Prices of US Treasuries rose slightly after the data while the dollar fell against a basket of currencies. US stock index futures were trading higher.

Business spending on equipment has buoyed economic growth for the past four quarters and is expected to make a solid contributi­on to GDP in the October-December period. The economy grew at a 3.0 percent annualized rate in the third quarter.

Strong business spending on equipment is helping to boost manufactur­ing, which accounts for about 12 percent of the US economy. Last month, there were increases in orders for machinery, electrical equipment, appliances and components, primary metals and computers and electronic products.

Overall orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, fell 1.2 percent last month as demand for transporta­tion equipment tumbled 4.3 percent. Durable goods orders increased 2.2 percent in September.

In a separate report on Wednesday, the Labor Department said initial claims for state unemployme­nt benefits declined 13,000 to a seasonally adjusted 239,000 for the week ended Nov 18, reversing the prior week’s increase.

Claims had risen in recent weeks as a backlog of applicatio­ns from Puerto Rico was processed following repairs to infrastruc­ture damaged by Hurricanes Irma and Maria. A Labor Department official said claims-taking procedures continued to be disrupted in the Virgin Islands.

Last week marked the 142nd straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. 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 a 17-year low of 4.1 percent. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 1,250 to 239,750 last week.

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