By Lucia Mutikani
WASHINGTON- New orders for key US manufactured capital goods increased more than expected in December, but business spending on equipment was likely muted in the fourth quarter after a strike at Boeing disrupted aircraft deliveries.
Nonetheless, the report from the Commerce Department on Tuesday suggested business investment in equipment was poised to pick up in the first quarter. Spending could get a boost from plans by President Donald Trump’s new administration to cut taxes and lower regulatory barriers, though tariffs on imported goods could be an obstacle.
While businesses are warming to increasing investment, consumers are growing more nervous about the labor market and less upbeat on the economy’s prospects now and in the months ahead, which suggests some moderation in spending. Households also expect higher inflation and interest rates this year, another report showed.
“The economy will likely grow close to trend in the first quarter but could dip below trend if the job market softens faster than expected,” said Jeffrey Roach, chief economist at LPL Financial.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 0.5 percent after an upwardly revised 0.9 percent gain in November, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast these so-called core capital goods orders would climb 0.3 percent after a previously reported 0.4 percent rise in November.
Core capital goods orders advanced 0.6 percent on a year-on-year basis. Shipments of core capital goods increased 0.6 percent after climbing 0.4 percent in November.
There were rises in orders of machinery, electrical equipment, appliances and components as well as computers and electronic and fabricated metal products. But primary metals orders fell.
Orders for transportation equipment dropped 7.4 percent, amid a 45.7 percent tumble in commercial aircraft orders. Boeing reported on its website that it had received 142 aircraft orders in December, sharply up from the 49 in November. Most of the orders last month were for the 737 MAX planes.
Orders for motor vehicles and parts fell 0.2 percent. Overall orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, declined 2.2 percent after decreasing 2.0 percent in November.
Non-defense capital goods orders fell 7.8 percent after dropping 3.2 percent in November. Shipments of these goods increased 3.5 percent after falling 0.9 percent in the prior month.
These shipments go into the calculation of the business spending on equipment component in the gross domestic product report. A crippling strike by factory workers at Boeing, which started in mid-September and ended in early November, disrupted production and delivery of aircraft.
Strong aircraft deliveries helped to boost business spending on equipment in the second and third quarters, despite the negative impact of higher interest rates on manufacturing. — Reuters