US business spending rises on better demand
Manufacturing is recovering from a prolonged slump, driven by the energy sector, bucking a slowdown in the broader economy. The Federal Reserve last week described business investment as appearing to have “firmed somewhat.”
WASHINGTON: New orders for US-made capital goods unexpectedly fell in February, but a surge in shipments amid demand for machinery and electrical equipment supported expectations for an acceleration in business investment in the first quarter.
Manufacturing is recovering from a prolonged slump, driven by the energy sector, bucking a slowdown in the broader economy. The Federal Reserve last week described business investment as appearing to have “firmed somewhat.”
“The evidence is building that manufacturing activity is on something of an upswing and that capital spending on business equipment is poised to advance for the second consecutive quarter,” said John Ryding, chief economist at RDQ Economics in New York.
The Commerce Department said on Friday that non-defence capital goods orders excluding air- craft, a closely watched proxy for business spending plans, dipped 0.1 per cent last month after rising 0.1 per cent in January. That suggested a slowdown in business spending in the second quarter.
Core capital goods
Shipments of these so-called core capital goods jumped 1.0 per cent after declining 0.3 per cent in January. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. Last month’s jump reflected increases in orders at the end of 2016. Economists polled by Reuters had forecast core capital goods orders rising 0.6 per cent last month.
Orders for machinery inched up 0.1 per cent while shipments increased 0.9 per cent. Orders for electrical equipment, appliances and components advanced 2.2 per cent, the biggest increase in seven months, and shipments rose 1.5 per cent. US financial markets were mixed as investors awaited the outcome of a vote later on Friday on a Republican-sponsored bill to replace Democratic President Barack Obama’s 2010 Afford- able Care Act. The vote is seen as the first significant policy test for President Donald Trump.
Stocks traded higher
Stocks on Wall Street were trading higher, while the dollar was little changed. Prices for US government bonds rose.
“What the healthcare bill does is serve as the first litmus test of the Trump/Republicans’ ability to deliver on important legislative initiatives,” said Steven Ricchiuto, chief US economist at Mizuho Securities in New York.
“If they fail at this then the prospects for tax reform, infrastructure and defense spending will need to be rethought.”
A recovery in oil prices from multi-year lows is driving demand for equipment in the energy sector, helping to lift the manufacturing sector.