Orders for U.S. business equipment rose in June following a revised drop the prior month, indicating corporate investment remains stop-and-go and could hold back economic growth.
Bookings for non-military capital goods excluding aircraft climbed 1.4 percent after a 1.2 percent decrease in May that was previously reported as a 0.7 percent gain, data from the Commerce Department showed today in Washington. Demand for all durable goods -- items meant to last at least three years -- increased 0.7 percent.
Companies are waiting to ramp up capacity until they believe demand is sustainable. As an improving job market will probably prompt consumers to keep replacing older cars, appliances and computers, a sign manufacturers will remain busy and give growth a boost in the second half of the year.
“We’re seeing a continuation of the pattern we’ve seen, which has been relatively subdued growth in capital goods and equipment spending,” said Ryan Wang, an economist at HSBC Securities USA Inc. Wang is the second-best forecaster for capital-goods orders over the past two years, according to data compiled by Bloomberg.
“We’ve seen that businesses have been a bit more willing to increase their workforce this year, but capital investment decisions are based on longer-term expectations for final demand, and I think that businesses are probably going to remain cautious for now,” said Wang.
Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in September fell 0.2 percent to 1,977.5 at 8:49 a.m. in New York.
Unexpected drop
Non-military capital goods excluding aircraft orders were projected to climb 0.5 percent in the Bloomberg survey of economists. Such bookings are considered a proxy for future business investment.
The median forecast of 82 economists surveyed by Bloomberg projected total durable goods orders would rise 0.5 percent. Estimates ranged from a decline of 1 percent to an increase of 2.5 percent. The May reading was revised to show a 1 percent drop compared with a previously reported 0.9 percent decrease.
Shipments of non-military capital goods excluding aircraft, used in calculating gross domestic product, dropped 1 percent in June after falling 0.1 percent the prior month, today/s report showed. The May reading had previously been reported as a 0.5 percent gain.
Other surveys have indicated manufacturing has improved in recent months. The Institute for Supply Management’s index was 55.3 last month, little changed from a five-month high of 55.4 in May. Readings greater than 50 indicate expansion.
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