US factory orders slip; business spending robust

US factory orders slip; business spending robust

Factory goods orders dipped 0.1 per cent amid a drop in demand for both civilian and defence aircraft after an upwardly revised 1.7 per cent jump in September, the Commerce Department said. (AFP/Robyn Beck)
WASHINGTON: New orders for US-made goods fell less than expected in October and shipments of core capital goods were much stronger than previously reported, pointing to sustained strength in manufacturing that should buoy the economy.Factory goods orders dipped 0.1 per cent amid a drop in demand for both civilian and defence aircraft after an upwardly revised 1.7 per cent jump in September, the Commerce Department said on Monday (Dec 4)."These data remain consistent with a solid upswing in manufacturing activity and an acceleration in corporate capital spending," said John Ryding, chief economist at RDQ Economics in New York.Economists had forecast factory orders falling 0.4 per cent in October after a previously reported 1.4 per cent increase in the prior month.Orders for non-defence capital goods excluding aircraft -seen as a measure of business spending plans - rose 0.3 per cent in October instead of the 0.5 per cent drop reported last month.These so-called core capital goods orders surged 2.3 per cent in September. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, advanced 1.1 per cent in October instead of the previously reported 0.4 per cent rise.
Core capital goods shipments increased 1.3 per cent in September. October's upward revision to core capital goods shipments prompted forecasting firm Macroeconomic Advisers to boost its fourth-quarter GDP growth estimate by two-tenths of percentage point to a 2.7 per cent annualised rate.Economists at Barclays lifted their forecast to a 2.5 per cent pace from a 2.4 per cent rate. The economy grew at a 3.3 per cent pace in the third quarter.UPSIDE RISK"The shipments revision adds upside risk to our already double-digit forecast for fourth-quarter equipment spending growth, and the revised orders data show no sign of a slowdown in capital expenditures in the months ahead," said Jesse Edgerton, an economist at JPMorgan in New York.
Business spending on equipment has increased strongly this year as corporations anticipated hefty tax cuts from the Trump administration. Republicans in the US Congress have approved a broad package of tax cuts, including slashing the corporate income tax rate to 20 per cent from 35 per cent.The dollar rose against a basket of currencies on the data and the anticipated fiscal stimulus, while prices for US Treasuries fell. US stocks were mostly trading higher.Business spending on equipment increased at its fastest pace in three years in the third quarter, helping to underpin manufacturing. The sector, which makes up about 12 per cent of the US economy, is also being supported by a weaker dollar.The greenback has lost about seven per cent of its value against the currencies of the United States' main trading partners this year. Factory activity is also being boosted by businesses replenishing depleted inventories and strengthening global demand, helping to offset a slowdown in spending on mining exploration, wells and shafts.In October, orders for machinery rose 1.9 per cent after a 0.8 per cent gain in September. Mining, oil field and gas field machinery orders fell 1.4 per cent after soaring 20.2 per cent in September.Orders for transportation equipment declined 4.2 per cent, reflecting an 18.5 per cent plunge in civilian aircraft orders and a 7.6 per cent drop in bookings for defense aircraft. Transportation equipment orders rose 4.7 per cent in September.Motor vehicle orders increased 1.3 per cent after being unchanged in September.Inventories of unsold goods at factories rose 0.2 per cent in October, with overall shipments increasing 0.6 per cent. That left the inventories-to-shipments ratio unchanged at 1.37.
Source: Reuters
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