Industryweek 34982 Manufacturing 1 1
Industryweek 34982 Manufacturing 1 1
Industryweek 34982 Manufacturing 1 1
Industryweek 34982 Manufacturing 1 1
Industryweek 34982 Manufacturing 1 1

US Business-Equipment Orders Decline by More Than Expected

May 24, 2019
The data precede the Trump administration's decision this month to increase tariffs to 25% on some imports from China.

Orders with U.S. factories for business equipment declined in April by more than expected in the first drop this year, signaling deepening fallout from the trade war with China even before the latest increase in tariffs.

A proxy for business investment -- non-military capital goods orders excluding aircraft -- dropped 0.9% from the prior month after a downwardly revised 0.3% gain, according to Commerce Department figures Friday. The broader measure of bookings for all durable goods, or items meant to last at least three years, fell 2.1%, slightly below economist estimates, and March was revised lower.

Key Insights

The decline in companies' demand for equipment indicates continued hesitation amid the trade war with China that’s delayed or curbed investment. U.S. firms may also still be putting orders on hold as they work through an overhang of inventory, while President Donald Trump's ratcheting-up of trade tensions is likely to weigh further on business demand.

The data precede Trump's decision this month to increase tariffs to 25% on some imports from China and his threats of additional levies. The impact may start to be reflected in May figures due next month.

The report showed the biggest drop in orders for motor vehicles and parts in almost a year, while demand for primary metals and computers and electronic products also declined.

Orders increased for fabricated metal products and machinery as well as electrical equipment, appliances and components. The headline durable-goods figures were dragged down by the volatile transportation category.

Bookings for civilian aircraft and parts dropped 25.1%, after separate data showed Boeing Co.’s aircraft orders dwindled in April following the grounding of its 737 Max plane.

Yields on 10-year Treasuries remained lower following the report, while U.S. stock futures pared gains slightly.

Some figures used to calculate gross domestic product indicated softness: Shipments of non-military capital goods excluding aircraft were unchanged from the prior month -- slightly above the Bloomberg survey median for a 0.1% dip -- following a downwardly revised 0.6% drop.

Even with April's drop in demand, there was an upswing of momentum based on the three-month annualized gain for business-equipment orders, which picked up to 2.7% from 1.1%. For shipments, the pace slowed to 2.5% from 4%.

Excluding transportation, durable goods orders were unchanged from the prior month. Defense capital-goods orders rose 4.8%, while durable orders excluding defense fell 2.5%, the most since January 2018.

By Katia Dmitrieva

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