Demand Up For Durables, But Capital Goods Lag -- WSJ
April 27 2018 - 3:02AM
Dow Jones News
By Sharon Nunn
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 27, 2018).
WASHINGTON -- Demand for long-lasting U.S. factory goods rose in
March due to increased aircraft orders, but an underlying proxy for
business investment fell for the second time in three months.
Orders for durable goods -- manufactured products intended to
last at least three years, such as stoves and industrial robots --
increased a seasonally adjusted 2.6% in March from the prior month,
the Commerce Department said Thursday. Meanwhile, a
business-investment gauge, new orders for nondefense capital goods
excluding aircraft, declined 0.1% in March from the prior
month.
Taken together the Commerce Department's latest report provides
a mixed picture of U.S. business investment in the wake of
late-2017 tax cuts meant to encourage U.S. firms to make capital
expenditures.
"I was especially disappointed by the core capital goods
performance," Stephen Stanley, chief economist at Amherst Pierpont
Securities said in a note to clients. "This gauge has been
essentially flat on balance since October. I still believe that a
burst of investment activity is coming, but I am surprised that we
have yet to see much momentum in the orders measure."
Many economists expect overall U.S. economic output will grow at
a faster rate this year, bolstered by the recent tax-law changes.
Business investment increased robustly in 2017, but has slowed in
recent months. For the first quarter overall, the gauge rose 6.5%
compared with the same period last year. That is below the fourth
quarter's growth of 8.7% from the previous year.
Durable goods data tends to be choppy, and recent manufacturing
surveys still point to manufacturers' intention to make business
investments.
"It's difficult to know how much is [data] volatility or how
much is an actual loss of momentum," Jim O'Sullivan, chief U.S.
economist at High Frequency Economics said in an interview.
Transportation equipment, which clocked gains in four out of the
past five months, drove March's overall durable-goods increase.
Within this category, nondefense aircraft and parts orders rose
44.5% on the month, suggesting a strong first quarter of aircraft
orders at manufacturer Boeing Co. helped drive the headline figure.
When excluding the transportation category, durable-goods orders
were virtually unchanged in March from the previous month.
"In short, the details were not as strong as the headline, with
much of the strength from civilian aircraft," Mr. O'Sullivan
noted.
Excluding defense goods, another volatile category, orders rose
2.8% last month.
Overall orders were also up four out of the last five months and
saw a larger-than-expected monthly gain in February too, when
orders rose 3.5%. In the longer term, orders for long-lasting
factory goods have marched higher since the middle of 2016. Orders
rose 8.7% in the first quarter of 2018 compared with last year.
Thursday's report also showed a 1.7% decline in machinery orders
in the past month, the largest monthly drop since April 2016.
Meanwhile, orders for communications equipment rose 8.2%, the
largest gain since the beginning of 2016.
Write to Sharon Nunn at sharon.nunn@wsj.com
(END) Dow Jones Newswires
April 27, 2018 02:47 ET (06:47 GMT)
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