Orders for commercial equipment will increase again in May


A worker operates a forklift to transport boxes in a warehouse at Black & Decker Inc.’s DeWalt manufacturing plant in Charlotte, N.C. (Luke Charette/Bloomberg News)

[Stay on top of transportation news: Get TTNews in your inbox.]

Orders for business equipment with U.S. factories rose for a second straight month in May, indicating that companies will continue to make long-term investments despite higher borrowing costs and economic uncertainty.

Orders for major capital goods, a proxy for investment in equipment that excludes aircraft and military hardware, rose 0.7% last month after a 0.6% increase in April, Commerce Department figures showed June 27. The data is not adjusted for inflation.

For all durable goods – goods that last for at least three years – increased by 1.7%. Excluding transportation, orders rose 0.6 percent.

Fixed capital expenditures emphasize business operations to improve efficiency following higher labor and material costs. However, the risks of investment setbacks have increased due to high borrowing costs, tight access to credit and moderate economic growth.

Many economists, including those at Bloomberg Economics, expect the economy to fall into an investment-driven recession this year, partly reflecting an expected tightening in credit conditions. Others, however, expect the US to emerge from a total recession.

Estimates of capital goods, which help calculate equipment investment in the government’s gross domestic product report, came in at 0.2%, according to estimates. The third estimate of first quarter GDP will be released on June 29.

“The softening trend in major orders has been evident over the course of several quarters. We expect higher borrowing costs and tighter bank lending standards to constrain firms’ ability to expand going forward,” said Bloomberg economist Stuart Paul.

Gains in orders were concentrated in a few categories, including machinery, electrical equipment and motor vehicles. A Commerce Department report showed commercial aircraft registrations jumped 32.5 percent.

Boeing Co. reported 69 orders in May, more than double the previous month. While it’s often useful to compare the two, aircraft orders are volatile, and government data doesn’t always match the plane maker’s monthly figures.

Orders for defense capital goods were cut after last month’s surge.

Regional and national manufacturing surveys have indicated widespread weakness in the sector. The S&P Global Flash Factory Purchasing Managers’ Index fell to a six-month low in June, and the Institute for Supply Management’s manufacturing gauge pointed to a seven-month contraction.

With help from Chris Middleton and Augusta Saraiva.

Want more news? Listen to today’s daily briefing below or go here for more information:


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *