Tags: orders | business equipment | capital spending | durable goods

Orders for Business Equipment Drop by Most in 10 Months

Orders for Business Equipment Drop by Most in 10 Months
(Dollar Photo Club)

Thursday, 28 January 2016 11:21 AM

Orders for business equipment fell in December by the most in 10 months, a sign U.S. companies were slashing capital investment even before the turmoil in global financial markets.

Bookings for non-military capital goods excluding aircraft plunged 4.3 percent last month after a 1.1 percent decrease in November that was previously reported as down 0.3 percent, data from the Commerce Department showed Thursday. Orders for all durable goods — items meant to last at least three years — slumped 5.1 percent, the most since August 2014 and reflecting a broad-based pullback.

Spending on equipment may stay depressed as a further decline in oil prices prompts energy companies to retrench. What’s more, U.S. exporters continue to struggle against softer global demand and an appreciating dollar.

“Overall capex is going to be challenged in the fourth quarter,” Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York, said before the report. That’s a reflection of “what’s been happening in terms of the pain on the manufacturing side because of the commodity price declines, the appreciation currency in the U.S., and what’s going on globally.”

The median forecast of 80 economists surveyed by Bloomberg estimated orders for all durable goods would fall 0.7 percent, with projections ranging from a 7 percent drop to a 3.5 increase. Bookings for non-defense capital goods excluding aircraft — a proxy for business investment — were projected to slip 0.2 percent.

Shipments of non-military capital goods excluding aircraft, which are used to calculate gross domestic product, decreased 0.2 percent in December after falling 1.1 percent the month before. The Commerce Department issues its first estimate of fourth-quarter GDP on Friday.

Equipment Outlays

Equipment spending cooled in the final three months of the year after rising at a 9.9 percent annualized pace in the third quarter, the strongest since the same period in 2014.

Companies placed fewer orders for communications gear, computers, machinery and transportation equipment. The only increases were in primary metals and electrical equipment.

Commercial aircraft orders slumped 29.4 percent in December after falling 23.3 percent a month earlier. Industry data doesn’t always correlate with the government statistics on a month-to-month basis. Boeing Co., the Chicago-based aerospace company, said it received 223 orders for planes last month, the most in a year.

Minus Transportation

Excluding transportation equipment, which often swings from month to month, bookings decreased 1.2 percent in December, the report showed.

Orders for military equipment dropped 34.4 percent last month, while demand for non-defense goods decreased 2.9 percent after falling 2 percent.

Thursday’s report indicates companies are making progress paring inventories after stockpiles earlier this year outstripped demand. Durable goods inventories increased 0.5 percent, the most since the end of 2014.

The plunge in crude oil prices has prompted producers to reduce investment. Hess Corp., the New York-based oil and natural gas producer, cited low oil prices when it said this week it will cut capital spending on exploration and production by 40 percent from a year ago to $2.4 billion.

Soft global growth prospects have also weighed on capital spending projects as economies in China and other emerging markets slow and domestic demand shows signs of strain.


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Economy
Orders for business equipment fell in December by the most in 10 months, a sign U.S. companies were slashing capital investment even before the turmoil in global financial markets.
orders, business equipment, capital spending, durable goods
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2016-21-28
Thursday, 28 January 2016 11:21 AM
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