A bar graph of 2017 capital goods orders. Bloomberg

Orders for US Capital Goods Ease after Robust October

Orders placed with U.S. factories for business equipment fell in November, while orders for all durable goods increased 1.3% as bookings for commercial and military aircraft rebounded.

Orders placed with U.S. factories for business equipment fell in November after a sharp upward revision to the previous month, consistent with an upswing in corporate investment that’s helping propel the economy.

Bookings for non-military capital goods excluding aircraft eased 0.1% last month, according to data from the Commerce Department. The decline followed a 0.8% increase in October that was more than double the previously reported 0.3% advance. The median forecast in a Bloomberg survey for November called for a 0.5% gain.

Orders for all durable goods — items meant to last at least three years — increased 1.3% as bookings for commercial and military aircraft rebounded.

Core capital goods orders advanced at an 18% annualized rate in the three months through November, while those shipments moved ahead at a 14.9% pace. The data indicate spending on equipment will provide more fuel for economic growth after a third-quarter contribution that was the most in two years.

Increased investment may be sustained in 2018 as lower corporate tax rates, from the new Tax Cuts and Jobs Act, give businesses the wherewithal to boost capital spending at the same time the global economy shows signs of firming.

What Economists Say ...

“An increase in core capital goods shipments in November on the back of upward revision to the prior month support Bloomberg Economics’ forecast for another robust showing in equipment investment in GDP, which is estimated to add more than 40 bps to growth in the quarter on the back of 58 bps contribution in 3Q. BE also expects business investment growth to accelerate going into the next year and play a greater role as a contributor to GDP growth over the medium term, a key factor supporting Bloomberg Economics’ forecast for a moderate pickup in the underlying pace of economic growth.” — Yelena Shulyatyeva, Bloomberg Economics

Shipments of non-military capital goods excluding aircraft, which are used to calculate gross domestic product, increased 0.3% in November after rising a revised 1.3% the month before, according to the Commerce Department. October was previously reported as a 1.1% gain.

Total demand last month was propelled by increased bookings for commercial aircraft, which climbed 14.5% in November after declining 15.8% a month earlier.

Boeing Co., one of the world’s largest airplane makers, said it received 159 orders for planes last month, up from 64 the previous month. Deliveries for the month totaled 70 aircraft, up from 56. Industry data don’t always correlate with the government statistics on a month-to-month basis.

Excluding transportation equipment demand, which is often volatile from month to month, bookings for durable goods decreased 0.1% in November, the first drop since May.

Other Details

Orders for motor vehicles and parts rose 1.4% after a 1.6% increase. … Bookings fell for fabricated metals, machinery, communications equipment and computers. … Orders picked up for primary metals and electrical equipment. … Durable goods inventories rose 0.2% for a second month. … Defense capital goods orders increased 4.8% after a 9.6% drop

By Vince Golle, with assistance from Jordan Yadoo.

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