US core capital goods orders surpass expectations in Sept – Reuters

Money Bizwiz Team
2 Min Read

Boost in U.S. Capital Goods Orders Signals Potential Slowdown in Business Spending

In a recent report from the Commerce Department’s Census Bureau, new orders for key U.S.-manufactured capital goods saw a higher than expected increase in September. However, there are indicators that business spending on equipment may have slowed in the third quarter.

The closely watched proxy for business spending plans, non-defense capital goods orders excluding aircraft, saw a significant 0.5% jump last month following a 0.3% gain in August. Economists had predicted a more modest 0.1% increase, indicating positive growth in this sector.

While core capital goods shipments fell by 0.3% in September, the overall trend suggests that business investment in equipment has been impacted by higher borrowing costs. Despite this constraint, spending on equipment experienced a boost in the second quarter as financial conditions eased with anticipated interest rate cuts by the Federal Reserve.

However, non-defense capital goods orders declined by 4.5% in September, following a 4.4% drop in August. Shipments of these goods also saw a decrease of 3.6%. These figures contribute to the calculation of the business spending on equipment component in the gross domestic product report.

Business investment in equipment had risen at a robust 9.8% annualized rate in the second quarter, which played a significant role in driving the economy’s 3.0% growth pace. Growth estimates for the July-September quarter are currently anticipated to be as high as a 3.4% rate, and the government is set to release its advance estimate of third-quarter GDP in the coming week.

© Reuters. FILE PHOTO: Docked cargo ships are loaded with shipping containers at Port Elizabeth, New Jersey, U.S., July 12, 2023. REUTERS/Mike Segar/File Photo

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