Capital goods orders drop as business spending cools

Orders for U.S. business equipment fell in February for the second time in three months, signaling corporate investment will be slow to gain momentum following an unusually harsh winter that put a damper on demand. More

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capital goods

Capital goods orders drop as business spending cools

Posted 3/26/14

WASHINGTON – Orders for U.S. business equipment fell in February for the second time in three months, signaling corporate investment will be slow to gain momentum following an unusually harsh winter that put a damper on demand.

Bookings for non-military capital goods excluding aircraft fell 1.3 percent after a 0.8 percent gain in January that was smaller than initially reported, data from the Commerce Department showed today in Washington. Demand for all durable goods - items meant to last at least three years - climbed a more-than-forecast 2.2 percent, reflecting the biggest gain in automobile demand in a year.

Frigid temperatures and snow across much of the country have muddied the outlook on the U.S. economy by restraining the housing rebound and consumer spending. That means companies will need to see additional proof that the recovery will accelerate in 2014 before expanding operations.

“Demand momentum has slowed somewhat,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “The bad weather and the winter probably aggravated the downturn somewhat.” Wang is the second-best forecaster of non-defense capital goods orders ex-aircraft.

Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in June climbed 0.4 percent to 1,866.3 at 8:46 a.m. in New York.

Forecasts for durable goods orders in the Bloomberg survey ranged from an increase of 3 percent to a 1.5 percent drop. January’s figure was revised to show a 1.3 percent drop from a previously reported 1 percent decline.

Excluding transportation

Excluding transportation equipment, where demand often is volatile month to month, orders increased 0.2 percent after a 0.9 percent gain in January.

Bookings for non-military capital goods excluding aircraft are considered a proxy for future business investment. Last month’s drop was led be declining demand for machinery, communications equipment and computers.

Shipments of such goods, used in calculating gross domestic product, climbed 0.5 percent in February after a 1.4 percent drop the prior month that was larger than previously estimated.

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