Capital Goods

Orders for U.S. capital goods signal business spending slowdown

BLOOMBER FILE PHOTO/DHIRAJ SINGH
AUGUST ORDERS FOR U.S.-made capital goods, including airplanes and manufacturing, were unable to make up for declines in the previous two months. Boeing Co. received an order for only one plane in August, down from 260 in July.
Posted 9/27/12

WASHINGTON - A gain in demand for capital goods such as equipment and machinery in August failed to make up for declines in the previous two months, showing slowdowns in business investment and exports threaten to further restrain the U.S. economic recovery.

Orders for non-defense capital equipment excluding airplanes rose 1.1 percent after decreases of 5.2 percent in July and 2.7 percent in June, the Commerce Department reported today in Washington. Total orders for durable goods, those meant to last at least three years, plunged 13 percent, the most since January 2009, paced by a plunge decline in demand for civilian aircraft.

Manufacturing, once a pillar of the economic recovery, has cooled, hurting companies such as Caterpillar Inc. as concern about the fiscal cliff of tax increases and government spending cuts that may take effect next year causes businesses to pull back. Slowing growth from Europe to China also is putting a dent on exports, another headwind for American factories.

“Manufacturers are struggling with slowing global growth and they’re worried about where the economy is headed moving into 2013,” Chad Moutray, chief economist at the National Association of Manufacturers, a Washington-based trade group, said before the report.

The median forecast of 79 economists surveyed by Bloomberg projected a 5 percent drop in total orders. Estimates ranged from a decline of 9.4 percent to a 4 percent increase.

Aircraft drop

Civilian aircraft bookings, which are often volatile, slumped 102 percent in August after surging 51 percent the prior month, today’s report showed. Boeing Co., the largest U.S. aircraft maker, received an order for a single plane, down from 260 the month before.

Bookings for non-defense capital goods excluding aircraft are considered a proxy for future business investment in items such as computers, engines and communications equipment.

Shipments of those goods, used in calculating gross domestic product, fell 0.9 percent after decreasing 1.1 percent the prior month in July.

Caterpillar, the world’s biggest construction and mining equipment maker, this week cut its forecast for 2015 earnings after commodity producers reduced capital expenditures. While a global recession remains possible, Caterpillar is forecasting moderate and “anemic” growth through 2015, Chairman and Chief Executive Officer Doug Oberhelman said in a presentation to analysts on Sept. 24.

“We are in no way thinking we’re going to see a recession in 2013,” Oberhelman said. “Europe’s in recession today, probably going be a while to dig out. But the world we do not see as recessionary.”

Fewer exports

Exports dropped 1 percent in July as American companies shipped fewer automobiles, metals and consumer goods abroad, according to Commerce Department figures issued earlier this month.

U.S. consumers remain cautious after months of disappointing job gains and stagnant wages. Employers added 96,000 workers to payrolls last month, less than the 130,000 projected, and the unemployment rate fell to 8.1 percent after 368,000 people left the workforce, according to Labor Department data. The jobless rate has exceeded 8 percent for 43 months, the longest stretch since monthly records began in 1948.

“The economy is still pretty sluggish with unemployment where it is and with consumer confidence where it is,” Thomas J. Folliard, chief executive officer of auto retailer CarMax Inc., based in Richmond, Va., said on a Sept. 20 earnings call. “It’s impacting the customer’s willingness to go out and sign up for as long as a six-year loan.”

To boost growth, the Federal Reserve this month said it would keep its target interest rate near zero until at least mid-2015 and began a third round of stimulus, buying $40 billion in mortgage bonds a month until the labor market improves.

No comments on this story | Add your comment
Please log in or register to add your comment
Calendar
PBN Hosted
Events

Register today for the First Annual PBN Manufacturing Awards Dinner and Ceremony, Thursday, April 24th, at the Bryant University Bello Center. Click here for more information, including the list of winners.
  • Business Women
    Accomplished. Confident. Wicked Smart. Nominate women you know who deserve speci ...
  • 40 Under Forty
    It's the 10th Anniversary of 40 Under Forty, and PBN is planning a special event ...
  • Healthiest Employers
    Enrollment now open for the 2014 Healthiest Employers Program. Please take a mom ...
Advertisement
Purchase Data
Book of Lists
Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  •  
  • Purchase an e-File of the entire Book of Lists database
  •  
  • Purchase a printed copy of the Book of Lists
  •  
    National
    Local
    Latest News