Business Equipment Orders Remain Tepid
Data on core capital goods orders suggests companies are cautious about capital investment amid high borrowing costs and economic concerns.
Orders placed with U.S. factories for business equipment increased slightly in July after a downward revision to the prior month’s numbers, suggesting companies are somewhat cautious about capital investment amid high borrowing costs and economic concerns.
The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, increased 0.1 percent last month after a revised 0.4 percent decline in June, Commerce Department figures showed Thursday. The numbers aren’t adjusted for inflation.
Bookings for all durable goods—items meant to last at least three years—slid by the most since April 2020, reflecting fewer bookings for commercial aircraft. Excluding transportation equipment, orders rose 0.5 percent.
| Metric (Month-over-Month change) | Actual | Estimate |
|---|---|---|
| Durable goods orders | -5.2% | -4% |
| Capital goods orders excluding defense & aircraft | +0.1% | +0.1% |
| Capital goods shipments, excluding defense & aircraft | -0.2% | +0.1% |
The figures underscore how high borrowing costs, stiffer credit terms, and lingering economic uncertainty are curbing firms’ desire to pursue longer-term capital investments. The report showed a decline in bookings for computers and related products.
Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, decreased for a second month. The first estimate of third-quarter GDP will be released in late October.
Economists are generally optimistic about growth in the current quarter, in the wake of data pointing to a durable American consumer. Last quarter, GDP exceeded economists’ forecasts, in part due to the strength of business investment.
The Commerce Department’s report showed bookings for commercial aircraft, which are highly volatile from month to month, decreased nearly 44 percent after surging in the month prior. Boeing Co. reported 52 orders in July, about a sixth of the June tally.
Orders for defense capital goods rose 2.5 percent after large declines in prior months.
Regional and national surveys of manufacturing have pointed to widespread weakness across the sector. S&P Global factory purchasing managers data for August showed a further deterioration in new orders, and the Institute for Supply Management’s manufacturing gauge has indicated contraction for nine months.
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