Commerce says businesses plan to spend

May 26, 2015 09:48 AM

U.S. business investment spending plans increased solidly for a second straight month in April, a hopeful sign for manufacturing activity after a long spell of weakness.

The Commerce Department said on Tuesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.0 percent last month after an upwardly revised 1.5 percent increase in March.

The so-called core capital goods orders were previously reported to have increased 0.6 percent in March.

"It provides some indication that business capital investment activity might be on the mend," said Millan Mulraine, deputy chief economist at TD Securities in New York.

"However there is still a long way before we can get the necessary confirmation that the overall economic recovery is truly on track."

Business spending has slackened as a sharp decline in energy prices forced oilfield companies, including Schlumberger and Halliburton, to slash their capital expenditure budgets. Investment has also been undermined by a strong dollar, which has squeezed profits of multinational corporations.

The rebound in business spending, together with a sturdy labor market and firming underlying inflation, should keep the Federal Reserve on course to raise interest rates later this year.

U.S. government debt prices trimmed gains on the data. The dollar rose against a basket of currencies.

The increase in core capital goods orders offers cautious optimism that business spending outside the energy sector will pick up in the coming months and support manufacturing, and the broader economy, after a dismal first quarter.

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