U.S. Durable-Goods Orders Flat in August
September 28 2016 - 9:00AM
Dow Jones News
By Josh Mitchell and Eric Morath
WASHINGTON-U.S. factories posted flat orders of big-ticket goods
in August, but underlying figures suggest businesses are boosting
spending after long period of cutting.
The Commerce Department said Wednesday orders for durable
goods-products such as cars, tractors and refrigerators designed to
last longer than three years-were unchanged from a month earlier.
When excluding the volatile categories of defense and
transportation products, sales declined.
Economists surveyed by The Wall Street Journal expected a 1.5%
drop in overall orders.
The industry has been choppy of late: Orders had risen sharply
in July after falling precipitously in June. Through eight months
of 2016, orders are down 0.6% compared to the same period a year
earlier.
But the report offered signs that companies are becoming
confident enough to retool their facilities, a development that if
sustained would lift the economy to stronger growth. Orders for
capital goods excluding aircraft and defense-a rough measure of
business investment-rose 0.6% in August from a month earlier. That
category has risen for three consecutive months, though such
spending remains 4% lower from a year earlier.
Weak business spending has been a major factor behind the
economy's subpar growth in recent years, and it has presented a
mystery to economists. Some of the weakness is tied to depressed
energy prices, which have led to a decline in drilling and
exploration, but other factors appear at play.
The Federal Reserve pointed to "soft" business spending in its
statement earlier this month after it held off on raising
short-term interest rates. The Fed has kept rates exceptionally low
since the recession to prod businesses and consumers to step up
spending and boost economic growth. Consumers have boosted
purchases broadly, contrasting with the subdued posture of
companies.
"Investment spending really has been quite weak for some time,
and we're really not certain exactly what is causing that," Fed
Chairwoman Janet Yellen said in a media conference following the
Sept. 21 Fed meeting. "Part of it, of course, has been the huge
contraction in drilling activity associated with falling oil
prices, but the weakness in investment spending extends beyond that
sector. And I'm not certain of exactly what explains that."
Wednesday's report offered a mixed outlook for the manufacturing
sector, which has also suffered amid a dicey global economy. The
strong dollar, relative to other currencies, in recent years has
driven up the price of American goods in foreign markets, hurting
exports.
Orders outside of transportation fell 0.4% in August and have
dropped for three of the past four months. Orders outside of
defense fell 1% last month from July.
But the pickup in business investment suggests higher confidence
and demand from companies in the U.S. Also, sales of cars and
vehicle parts rose a healthy 0.7% last month, suggesting that
consumer-driven sector remains robust.
Other reports suggest factories are taking a hit of late. The
Institute for Supply Management, a trade group, said earlier this
month that factory activity declined in August for the first time
since February.
The Commerce Department's durable-goods report can be accessed
at:http://www.census.gov/manufacturing/m3.
Write to Josh Mitchell at Joshua.mitchell@wsj.com and Eric
Morath at eric.morath@wsj.com.
(END) Dow Jones Newswires
September 28, 2016 08:45 ET (12:45 GMT)
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