Tags: Capital Goods | Durable | Orders | Economy

Durable Goods Unexpectedly Fall as Business Investment Plans Plunge

Tuesday, 28 October 2014 08:36 AM

Orders to U.S. companies for long-lasting manufactured goods fell for a second month in September, while a key category that signals business investment plans dropped by the biggest amount in eight months.

The declines, however, were likely a temporary soft patch that will likely be followed by a resumption of stronger growth.

Orders for durable goods retreated 1.3 percent in September after a record 18.3 percent tumble in August, the Commerce Department reported Tuesday. The August drop followed a record 22.5 percent increase in July. The wide swings in both months were driven by the volatile aircraft category, which saw orders soar in July only to plunge in August.

A category that serves as a proxy for business investment fell 1.7 percent in September, the biggest drop since January.

Manufacturing has been a cornerstone of strength for the economy this year, and the recent weakness is not expected to be long-lasting. Economists said they remained optimistic about the outlook for manufacturing, in large part because of their expectation that businesses will keep investing to expand and modernize their operations.

Paul Ashworth, chief U.S. economist for Capital Economics, said he still expected solid business investment spending to support overall economic growth of around 3.3 percent in the third quarter.

For September, there was weakness in a number of areas. Demand for transportation goods fell 3.7 percent, with orders for commercial aircraft falling 16.1 percent. Demand for motor vehicles and parts slipped 0.1 percent. Orders for machinery fell 2.8 percent, and demand for computers declined 5.3 percent.

Demand for primary metals such as steel rose 2.2 percent, while orders for appliances rose 1.8 percent.

On Thursday the government will release its first estimate for overall economic growth for the third quarter as measured by the gross domestic product. Analysts project that the economy grew at a 3 percent annual rate, and many believe growth will continue at that healthy clip in the final three months of this year.

The first half of the year was much more of a roller coaster, with the economy shrinking at an annual rate of 2.1 percent in the first quarter, reflecting the impact of a harsh winter and other adverse factors, and then bouncing back to growth of 4.6 percent in April-June period.

The Institute for Supply Management reported that its closely watched barometer of manufacturing performance fell to 56.6 in September from 59 in August.

Analysts said that the slowdown was consistent with a recent drop-off in global demand due to economic weakness in Europe and China and the rising value of the dollar, which makes American goods more expensive overseas.

But economists believe that American companies will still see enough in export gains in coming months which, when combined with strong domestic demand, will keep U.S. factories humming.

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Orders to U.S. companies for long-lasting manufactured goods fell for a second month in September, while a key category that signals business investment plans dropped by the biggest amount in eight months.
Capital Goods, Durable, Orders, Economy
464
2014-36-28
Tuesday, 28 October 2014 08:36 AM
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