New orders for major US manufactured capital goods rose more-than-expected in August, and demand for the previous month was stronger than previously estimated, suggesting a rebound in corporate equipment spending was underway after a prolonged collapse.
The upbeat Commerce Department report on Friday, however, did not change the view that the economy’s recovery from the COVID-19 recession was slowing as government money to help businesses and tens of millions of unemployed Americans ran out. . New coronavirus cases are on the rise in parts of the country. This could reduce consumer spending, with retail sales already slowing.
Federal Reserve Chairman Jerome Powell this week highlighted the need for more fiscal stimulus, telling lawmakers Thursday that it could mean the difference between a continued recovery and a much slower economic slogan. Another bailout package looks unlikely ahead of the November 3 presidential election.
Orders for non-defense capital goods excluding aircraft, a closely monitored indicator for corporate spending plans, rose 1
Economists interviewed by Reuters had predicted that basic capital goods orders would gain 0.5% in August.
Orders for basic capital goods last month were spurred by increased demand for machinery, primary metals, computers and electronics. But orders for fabricated metal products and electrical equipment, appliances and components fell.
US stocks fell. The dollar was higher against a basket of currencies. US Treasury prices have risen.
An excellent third quarter is expected
Shipments of basic capital goods rose 1.5% last month. Shipments of basic capital goods are used to calculate equipment spending in measuring the government’s gross domestic product. They rose 2.8% in July. Business investment tumbled at a record annualized rate of 26% in the second quarter, with equipment spending plummeting at a record rate of 35.9%. Equipment investments have contracted for five consecutive quarters.
Economic activity rebounded sharply over the summer as businesses reopened after mandatory closures in mid-March to slow the spread of the coronavirus. Gross domestic product is expected to rebound to a record annualized rate of 32% in the third quarter, after plunging to a rate of 31.7% in the April-June period, the worst performance since the government began to hold records in the year. 1947.
But the waning of fiscal stimuli throws a cloud on growth prospects for the fourth quarter. Goldman Sachs on Wednesday cut its fourth quarter GDP growth estimate to a rate of 3% from a pace of 6%, citing “the lack of additional fiscal support”.
Orders for durable goods, items ranging from toasters to planes meant to last three years or more, rose 0.4% in August after climbing 11.7% in July. Durable goods orders were supported by a 0.5% increase in orders for transportation equipment, although demand for motor vehicles and defense aircraft declined.
No orders for civilian aircraft were reported for the second consecutive month of August.
Boeing struggled with cancellations as airlines grapple with sharply reduced demand for air travel due to the pandemic. The grounding of Boeing’s best-selling 737 MAX jets since March 2019 after two accidents in Indonesia and Ethiopia also weighed on the company.