US durable goods orders beat expectations; core capital goods rebound
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2023-09-27 22:29
WASHINGTON (Reuters) -Orders for long-lasting U.S. manufactured goods rose in August as an increase in machinery offset a plunge in

WASHINGTON (Reuters) -Orders for long-lasting U.S. manufactured goods rose in August as an increase in machinery offset a plunge in civilian aircraft, and business spending on equipment appeared to regain some momentum after faltering early in the third quarter.

Part of the surprise increase in durable goods orders reported by the Commerce Department on Wednesday, however, likely reflected higher prices as inflation picked up last month. Nevertheless, the report pointed to underlying strength in the economy, despite the Federal Reserve's aggressive monetary policy tightening, which is slowing demand for goods and raising the cost of credit for businesses wanting to invest.

"The U.S. economy is proving to be remarkably resilient," said Priscilla Thiagamoorthy, a senior economist at BMO Capital Markets in Toronto.

Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, gained 0.2% last month. Data for July was revised lower to show orders for these goods decreasing 5.6% instead of 5.2% as previously reported.

Economists polled by Reuters had forecast durable goods orders falling 0.5% last month. Orders increased 4.2% year-on-year in August.

Machinery orders rose a solid 0.5%, while bookings for electrical equipment, appliances and components surged 1.1%. Orders for computers and electronic products gained 0.3%. Demand for fabricated metal products increased 0.5%.

But orders for primary metals fell 0.6%. Transportation equipment orders slipped 0.2%, weighed down by a 15.9% tumble in civilian aircraft bookings. Motor vehicle and parts orders climbed 0.3%. The data suggested that manufacturing, which makes up 11.1% of the economy, continues to muddle along, despite surveys suggesting that the sector was mired in recession.

The Institute for Supply Management's manufacturing PMI has contracted for 10 straight months, though the pace of decline has slowed in recent months.

Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range as it battles inflation. A strike by the United Auto Workers union against General Motors Co, Stellantis and Ford Motor could pressure manufacturing.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, surged 0.9% after a downwardly revised 0.4% decline in the prior month. These so-called core capital goods orders were previously reported to have edged up 0.1% in July.

Core capital goods shipments rebounded 0.7% after falling 0.3% in July. Shipments of nondefense capital goods jumped 1.2%, reversing the prior month's decline.

These shipments feed into the calculation of equipment spending in the gross domestic product report. Economists were divided on whether the surge in shipments would translate into stronger growth in equipment spending in the third quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Tags economy durablegoods epus finance usa