Orders for U.S. Business Equipment Fall
The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, decreased 0.1% last month.
Orders placed with U.S. factories for business equipment declined in July, and the prior month’s gain was revised lower, suggesting firms are more guarded about investment than previously thought.
The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, decreased 0.1 percent last month after a revised 0.5 percent gain in June, Commerce Department figures showed Monday. The data aren’t adjusted for inflation.
Bookings for all durable goods—those meant to last at least three years—jumped 9.9 percent. Excluding transportation equipment, orders fell 0.2 percent.
Orders declined for primary metals, computers, communications gear, and electrical equipment, the report showed. Bookings for motor vehicles and parts also fell.
Though many businesses are still committed to making long-term investments, uncertainty about the presidential election and future demand has caused firms to dial back expansion plans. That suggests factory production may struggle for momentum in the coming months.
At the same time, prospects that the Federal Reserve will lower interest rates and help bolster demand have the potential to encourage companies to move forward with new investment.
| Metric | Actual | Estimate |
|---|---|---|
| Durable goods orders | +9.9% | +5.0% |
| Capital goods orders, excluding defense & aircraft | -0.1% | +0.0% |
| Capital goods shipments, excluding defense & aircraft | -0.4% | +0.1% |
Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product (GDP) report, declined 0.4 percent at the start of the third quarter. Before the report, the Atlanta Fed’s GDPNow forecast penciled in a small increase in business equipment spending for the July-to-September period.
The Commerce Department’s report showed the level of bookings for commercial aircraft, which are volatile from month to month, rebounded sharply after plummeting by the most since mid-2020.
Boeing Co. reported 72 orders in July, up from 14 in June. The company’s commercial aircraft deliveries are showing signs of stabilizing after one of the most tumultuous periods in the company’s history.
While often helpful to compare the two, aircraft orders are volatile and the government data don’t always correlate with the planemaker’s monthly figures.
Orders for military capital goods climbed 1.2 percent in July, while total durable goods bookings excluding defense jumped 10.4 percent.
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What Bloomberg Economists Say…
“A variety of factors driving uncertainty about economic growth and the durability of consumer demand—including the November election—is likely leading firms to delay investment.”
— Eliza Winger
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Recent purchasing manager surveys have suggested that U.S. manufacturing is struggling for momentum. The Institute for Supply Management’s manufacturing gauge earlier this month showed factory activity shrank in July by the most in eight months, while the S&P Global flash August PMI contracted at the fastest pace this year.
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