US capital goods orders fall for first time in 3 months

WASHINGTON • Orders for United States capital goods dropped last month for the first time in three months, showing that businesses began tempering new investment after a third-quarter surge.

Bookings for non-military equipment excluding planes declined 0.4 per cent after a 0.6 per cent October gain that was about half as much as initially reported, data from the Commerce Department showed yesterday.

The value of orders for all durable goods - items meant to last at least three years - was little changed.

The pause in equipment orders represents one of several challenges facing American producers, who are contending with a strong dollar, tepid overseas demand and a recent inventory overhang. At the same time, resilient consumer demand that includes steady growth in auto sales is helping to soften the blow to manufacturers.

"There's no question that manufacturing is the weak part of the economy because of the extra exposure to exports and the inventory cycle," Mr Jim O'Sullivan, chief US economist at High Frequency Economics, New York, said before the report. Still, "the overall economy is chugging along OK, despite the weakness in manufacturing".

Bookings for all durables were projected to fall 0.6 per cent.

Shipments of non-defence capital goods excluding aircraft, which are used in calculating gross domestic product (GDP), decreased 0.5 per cent last month after a revised 1 per cent slump in October that was twice the previously estimated decline.

The figures indicate fourth-quarter capital spending will cool after a jump in the previous three months. Spending on equipment increased at a 9.9 per cent annualised pace in the third quarter, the strongest since last year, Commerce Department figures showed on Tuesday in its final estimate of GDP.

Companies last month placed fewer orders for primary metals, machinery and computers. Demand rose for communications equipment, motor vehicles and electrical gear. Orders for military equipment jumped 44.4 per cent last month, the most since April last year.

Excluding defence hardware, durable goods bookings fell 1.5 per cent. Factories are continuing to reduce stockpiles that built up earlier in the year, the report showed.

Durable goods inventories dropped 0.3 per cent for a second month. While business spending on equipment picked up in the third quarter, a slump in oil prices has caused energy exploration and production firms to cut back.

What is more, some companies have put investment plans on hold as they assess a dimmer global growth outlook.

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A version of this article appeared in the print edition of The Straits Times on December 24, 2015, with the headline 'US capital goods orders fall for first time in 3 months'. Print Edition | Subscribe