U.S Capital Equipment Orders Rise

Orders placed with U.S. factories for business equipment rebounded in April even as the prior month’s figure was revised downward, indicating resilient demand at the start of the second quarter, Commerce Department figures showed Friday.

Highlights of Durable Goods (April)

  • Non-military capital goods orders excluding aircraft rose 1% m/m (est. 0.7% gain) after falling 0.9% the prior month (revised from 0.4% drop); figure is proxy for business investment
  • Shipments of those goods, used to calculate gross domestic product, rose 0.8% (est. 0.4% increase) after a revised 0.7% decrease (prev. 0.8% drop)
  • Bookings for all durable goods, or items meant to last at least three years, fell 1.7% (est. 1.3% drop) following 2.7% increase
  • Key Takeaways

    Outside of declines in machinery and civilian aircraft, the gain in orders was fairly broad-based, spanning computers, electrical equipment and metals. While the figures are typically volatile, the latest report indicates business spending continues to expand at a healthy pace.

    Business investment, joining consumer spending, may help support a projected rebound in economic growth this quarter as demand gets a boost from lower taxes for companies and individuals. At the same time, rising input costs, along with President Donald Trump’s tariffs on imported metals and threats of other levies, pose risks for corporations’ investment plans.

    Aircraft orders weighed on total bookings: Boeing Co., the Chicago-based aerospace company, said it got 78 orders for aircraft in April, down from 197 the prior month. Friday’s government report showed that orders for civilian aircraft and parts fell 29 percent in April after surging 60.7 percent in March.

    According to GDP figures released in April, spending on business equipment rose at a 4.7 percent annualized pace in the first quarter, after surging 11.6 percent in the previous three months. It accounted for 5.8 percent of nominal GDP.

    Other Details

  • Excluding transportation-equipment demand, which is volatile, durable-goods orders rose 0.9 percent (median estimate 0.5 percent gain) after upwardly revised 0.4 percent gain
  • Orders for machinery fell 0.8 percent following a 3.2 percent drop
  • Motor vehicles and parts orders were up 1.8 percent; electrical equipment, appliances and parts advanced 2.6 percent
  • Fabricated-metal product orders rose 2 percent, primary metals up 1.3 percent
  • Durable goods inventories rose 0.3 percent
  • Defense capital-goods orders increased 3.1 percent following 21.2 percent plunge
  • Bloomberg

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    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell