New orders for US capital goods rise
WASHINGTON (Reuters) – New orders for key US-made capital goods rose by the most in six months in January and shipments increased, but the trend in both measures of business spending on equipment remained soft, leaving forecasts for weak first-quarter economic growth intact.
The slowing economy is helping keep inflation tame, with other data on Wednesday showing producer prices barely rising in February, resulting in the smallest annual increase in more than 1-1/2 years. This environment supports the Federal Reserve’s wait-and-see approach to further interest rate hikes this year.
“There is still a strong case for the Fed to remain patient,” said Michael Pearce, a senior US econo- mist at Capital Economics in New York. “The rebound in underlying capital goods orders is still consistent with a slowdown in business equipment investment growth, and producer price figures show few signs of a pick-up in inflation in the pipeline.”
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rebounded 0.8 percent, the biggest gain since July. These so-called core capital goods orders fell 0.9 percent in December.
Economists polled by Reuters had forecast core capital goods orders edging up 0.1 percent in January. Core capital goods orders increased 3.1 percent on a year-on-year basis.
Core capital goods orders in January were boosted by orders for machinery, which rebounded 1.4 percent after dropping 0.6 percent in December. Orders for electrical equipment, appliances and components jumped 1.7 percent after falling 0.2 percent in the prior month.
But orders for computers and electronic products declined 1.3 percent, the biggest drop since March 2017. There were also decreases in orders for primary metals, while orders for fabricated metal products were unchanged.
Shipments of core capital goods jumped 0.8 percent in January after edging up 0.1 percent in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.