Orders placed with U.S. factories for business equipment increased in June for a third straight month, a sign of investment momentum heading into the second half despite corporate concerns over tariffs, Commerce Department figures showed Thursday.
Highlights of Durable Goods
- Non-military capital goods orders excluding aircraft rose 0.6% month over month (estimated 0.5% gain) after advancing an upwardly revised 0.7% the prior month; the figure is proxy for business investment.
- Shipments of those goods, used to calculate gross domestic product, rose 1% (estimated 0.4% increase) after a 0.2% increase.
- Bookings for all durable goods, or items meant to last at least three years, rose 1% (estimated 3% advance) following 0.3% decrease (prev. 0.4% drop).
Key Takeaways
The miss in durable-goods orders may at least partly reflect seasonal adjustments around bookings for aircraft and parts, typically a volatile category, which for civilian equipment rose 4.3% after an 11.6% drop in May, according to the report. Defense aircraft and parts orders advanced 20.2% following a 36.1% gain.
Unadjusted figures for the categories showed much bigger increases in June. Boeing Co. previously said that the planemaker received 233 orders in June, up from 43 in May.
The gain in business-equipment orders included increases in computers and electronic products, along with electrical equipment, appliances and components. Machinery and fabricated-metal products also showed smaller pickups, while orders for primary metals declined for a second month.
The latest data signal business investment remains firm even as President Donald Trump widens a global trade war beyond steel and aluminum and into a growing range of products from China, as well as potential levies on autos.
Business spending, which is getting a boost from lower corporate taxes, is one of the factors supporting a projected pickup in second-quarter economic growth. The GDP report is due Friday from the Commerce Department.
At the same time, the uncertainty over trade policy may spur some companies to slow investment, resulting in a hit to economic growth in the second half or later. Companies including General Motors are citing higher prices for steel and aluminum - - the metals subject to import levies -- as impacting their business.
Other Details
- Excluding transportation equipment, durable-goods orders rose 0.4% (median estimate 0.5%) after rising an upwardly revised 0.3%; fifth straight gain.
- Orders for motor vehicles and parts rose 4.4%, most since March 2015, reversing most of a 4.5% drop in the prior month.
- Orders for fabricated-metal products rose 0.1%, while primary metals fell 0.4%, most since January; orders for computers and electronic products increased 0.6%.
- Defense capital-goods orders fell 11.6%, the most since March.
- Durable-goods inventories fell 0.1%, weakest since December 2016.
By Katia Dmitrieva
