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US Equipment Orders Rise for First Time in Three Months

July 27, 2016
Bookings for non-military capital goods excluding aircraft climbed 0.2% last month after a 0.5% decrease in May — though durable goods orders slumped 4%, the biggest dip since August 2014.

Orders for business equipment rose in June for the first time in three months, eking out a small gain that shows companies are in no rush to significantly ramp up investment.

Bookings for non-military capital goods excluding aircraft climbed 0.2% last month after a 0.5% decrease in May, data from the Commerce Department showed Wednesday in Washington. Orders for all durable goods — items meant to last at least three years — slumped a larger-than-forecast 4%, the most since August 2014.

While demand for business investment stabilized, bigger gains will be needed to jump-start an economy that’s been dependent on consumers. Signs of more stability in overseas markets would go a long way in helping to convince companies that demand remains healthy enough to justify more equipment spending.

“Decision-makers are reluctant to spend on equipment,” Kevin Cummins, an economist at RBS Securities Inc. in Stamford, Connecticut, said before the report. “That’s certainly one thing that has remained pretty weak and lackluster throughout the recovery.”

The median forecast of economists surveyed by Bloomberg estimated orders for all durable goods would fall 1.4%, with projections ranging from a 5% drop to a 2% increase. The gain in orders for non-defense capital goods excluding aircraft — a proxy for business investment — matched the median estimate.

Shipments of non-military capital goods excluding aircraft, which are used to calculate gross domestic product, decreased 0.4% in June after falling 0.5% the month before.

Companies placed more orders for electrical equipment and appliances in June than they have all year and demand rose for motor vehicles. Still, bookings weakened for metals, machinery, computers and communications equipment.

Commercial aircraft orders, meanwhile, slumped 58.8% in June after dropping 5.5% a month earlier.

Boeing Co., one of the world’s largest airplane makers, said it received 12 orders for planes last month, down sharply from 125 the previous month. Deliveries for the month totaled 74 aircraft, compared with 71 in May.

Excluding transportation equipment orders, which are often volatile from month to month, bookings for durable goods unexpectedly fell 0.5% in June, the report showed. They were projected to rise 0.3%.

Orders for military capital equipment decreased 20.7% last month, and demand for non-defense durable goods fell 3.9%.

Durable goods inventories fell 0.2%, while unfilled orders for non-defense capital goods excluding aircraft declined another 0.2%.

By Victoria Stilwell

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