US manufacturing, business spending on equipment slowing

US manufacturing, business spending on equipment slowing

File photo of workers walking past a rack of SUV doors on a cart, at the General Motors Assembly Plant in Arlington, Texas. (REUTERS/Mike Stone)
WASHINGTON,: New orders for US-made goods recorded their biggest decline in six months in January and business spending on equipment appeared to be slowing after strong growth in 2017.Factory goods orders fell 1.4 per cent amid a broad decrease in demand, the Commerce Department said on Tuesday (Mar 6). That was the largest drop since July 2017 and followed five straight monthly increases. Factory orders rose 1.8 per cent in December.January's drop in orders was broadly in line with economists' expectations. Orders surged 8.4 per cent on a year-on-year basis.Orders for non-defence capital goods excluding aircraft, which are seen as a measure of business spending plans, fell 0.3 per cent in January instead of declining 0.2 per cent as reported last month. Orders for these so-called core capital goods decreased 0.5 per cent in December.That was the first back-to-back drop since May 2016. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, slipped 0.1 per cent in January instead of edging up 0.1 per cent as reported last month.Core capital goods shipments increased 0.7 per cent in December.
Prices of US Treasuries rose after the data, while the dollar held at lower levels against a basket of currencies. US stock indexes were trading slightly higher.TAX WINDFALLBusiness spending on equipment is cooling after growing by a robust 4.8 per cent in 2017.But it is likely to remain supported as companies are expected to use some of their windfall from a US$1.5 trillion tax cut package to buy machinery and other equipment as they seek to boost sluggish productivity.
The Trump administration slashed the corporate income tax rate to 21 per cent from 35 per cent effective in January. The tax cuts, a weakening US dollar and strengthening global economy are expected to support manufacturing, which makes up about 12 per cent of the US economy.Sentiment among manufacturers remains bullish. A survey last week showed a measure of factory activity rose in February to its highest level since May 2004. But supply constraints and labor shortages are emerging, which could hurt factory output.In January, orders for transportation equipment dropped 10.0 per cent, weighed down by a 28.4 per cent plunge in the volatile orders for civilian aircraft.Orders for machinery dropped 0.4 per cent, the biggest decline since October 2016, after rising 0.6 per cent in December. Orders for mining, oil field and gas field machinery tumbled 8.9 per cent after increasing 5.0 per cent in the prior month. Orders for motor vehicles fell 0.5 per cent, reversing a 0.4 per cent gain in December.There were also declines in orders for primary metals and electrical equipment, appliances and components. But orders for computers and electronic products orders rose 0.5 per cent.Pointing to a slowdown in manufacturing, unfilled orders at factories fell 0.3 per cent in January. That was the biggest drop in six months and followed four consecutive monthly increases. Manufacturing inventories increased 0.3 per cent. They have risen in 14 of the last 15 months.Shipments of factory goods increased 0.6 per cent in January after advancing 0.7 per cent in December. The inventories-to-shipments ratio was unchanged at 1.35.
Source: Reuters
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