Drop in May Orders for US Capital Goods Follows April Jump

June 28, 2018
The underlying trend in business investment remains firm in the face of uncertainty related to U.S. tariffs.

Orders placed with U.S. factories for business equipment cooled unexpectedly in May after an upwardly revised April jump that was the largest this year, indicating resilient demand, Commerce Department figures showed Wednesday.

Highlights of Durable Goods (May)

  • Non-military capital goods orders excluding aircraft fell 0.2% (est. 0.5% gain) after surging 2.3% the prior month (prev. 1%); figure is proxy for business investment.
  • Shipments of those goods, used to calculate gross domestic product, dipped 0.1% (est. 0.3% increase) after a revised 1% increase (prev. 0.9%).
  • Bookings for all durable goods, or items meant to last at least three years, fell 0.6% (est. 1% decline) following a revised 1% decrease

Key Takeaways

While the figures are typically volatile, the latest data signal the underlying trend in business investment remains firm in the face of uncertainty related to U.S. tariffs. Orders for machinery and communications equipment increased in May.

Growth in business spending, which is getting a boost from lower corporate taxes, will be an additional source of support for the projected pickup in second-quarter economic growth primarily driven by consumer purchases.

Higher input costs, and uncertainty related to escalating threats of tit-for-tat tariffs between the U.S. and its trade partners, however, represent risks to the outlook.

Total bookings were beset by a slump in transportation equipment. Orders for motor vehicles slumped 4.2% in May, the biggest decrease since January 2015. Aircraft orders also depressed total bookings. Boeing Co., the Chicago-based aerospace company, said it received 43 orders for aircraft in May, down from 78 the prior month.

Other Details

  • Orders for machinery climbed 0.3%t after a 1.7% increase.
  • Communications equipment orders rose 5.7% after a 3.9% gain.
  • After surging in recent months, orders for primary and fabricated metals declined in May.
  • Bookings for civilian aircraft and parts fell 7%; defense capital-goods orders jumped 15.1%.
  • Excluding transportation-equipment demand, which is volatile, orders fell 0.3% after jumping 1.9%.
  • Durable goods inventories rose 0.3% for a second month.

By Shobhana Chandra

Popular Sponsored Recommendations

How to Build Zero-Cost On-Site Solar and Storage Projects

Nov. 25, 2023
The Inflation Reduction Act offers tax credits, incentives, and financing that enable no-cost projects. In Enel’s eBook, discover the critical role that incentives play in your...

Beware Extreme Software

Sept. 24, 2023
As a manufacturer, you understand the importance of staying ahead of the curve and being proactive in your approach to technology. With the rapid pace of change in the industry...

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

3D Printing a More Efficient Factory Floor

Nov. 16, 2023
Today’s additive manufacturing platforms make it simple to print a wide range of high-performing industrial parts as soon as possible and right where you need them — unlocking...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!