WASHINGTON- New orders for key US manufactured capital goods increased moderately in March and data for the prior month was revised lower, suggesting that business spending on equipment likely remained weak in the first quarter.
The report from the Commerce Department on Wednesday was published ahead of the release on Thursday of the government’s advance estimate of gross domestic product for the January-March quarter. The economy is expected to have delivered another quarter of strong performance, thanks to a resilient labor market that is driving consumer spending.
“From a narrow GDP accounting perspective, there should be no material impact on estimates for tomorrow’s first-quarter GDP growth,” said Conrad DeQuadros, senior economic advisor at Brean Capital. “The positive takeaway from this is that the report suggests that weakness in manufacturing does not appear to be intensifying, but neither are there signs of recovery.”
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 0.2 percent last month, the Commerce Department’s Census Bureau said. Data for February was revised lower to show these so-called core capital goods orders advancing 0.4 percent instead of 0.7 percent as previously reported.
March’s increase was in line with economists’ expectations. Core capital goods orders gained 0.6 percent year-on-year in March.
Business spending on equipment has struggled in the aftermath of 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022 to tame inflation. Though the US central bank is expected to start lowering rates this year, the timing of the first cut is uncertain as inflation remains elevated amid the economy’s resilience. The Fed has kept its policy rate in the 5.25 percent -5.50 percent range since July.
Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. US Treasury prices fell.
Core capital goods shipments rebounded 0.2 percent after falling 0.6 percent in February. These shipments likely were unchanged when adjusted for inflation.
