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Capital Goods Orders Up

U.S. Capital Goods Orders Rebound in April Despite Persistent Challenges

Posted on May 31, 2024
Writer: James Miller

New orders for key U.S.-manufactured capital goods rebounded stronger than expected in April, accompanied by an increase in shipments. This signaled a moderate improvement in business spending on equipment at the start of the second quarter.

Despite the positive uptick, challenges such as higher borrowing costs, a robust dollar, and subdued global demand continue to hinder business investment in equipment. 

Nonetheless, economists remain cautiously optimistic about a potential pickup in business investment in the coming months. Non-defense capital goods orders, excluding aircraft, rose by 0.3% in April, slightly exceeding economists’ expectations. However, the year-on-year data showed a more significant increase of 1.2% in core capital goods orders. 

The rebound in business spending on equipment, albeit marginal, contributed to economists at Goldman Sachs’ revised GDP growth estimate of 3.2% for the second quarter.

Orders for durable goods, including transportation equipment, saw a modest increase in April, although commercial aircraft orders notably decreased, largely influenced by Boeing’s reported decline in aircraft orders. Nonetheless, there were notable increases in orders for computers, electronic products, and machinery.

While the prospect of the Federal Reserve easing policy in September offers some hope, previous policy tightening has dampened investment, raising borrowing costs for businesses. 

For more insights, read the full article on Reuters.

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