Consecutive monthly declines in shipments of core capital goods suggest US business investment was meager at start of the third quarter.
(Bloomberg) — Consecutive monthly declines in shipments of core capital goods suggest US business investment was meager at start of the third quarter.
The value of shipped capital equipment excluding aircraft and military hardware — an input into the government’s calculations of gross domestic product — fell 0.2% in July, the biggest drop in four months. The Commerce Department’s latest figures, which aren’t adjusted for changes in prices, showed an even bigger drop in total capital goods shipments.
Using the producer price index for private capital equipment to adjust for inflation, core business equipment shipments have fallen three straight months — the longest stretch since 2020.
Thursday’s durable goods report suggests companies are beginning to temper their spending plans against a backdrop of higher capital costs, tighter loan standards, languishing export markets and lingering concerns about the US economic outlook.
Business investment in equipment is coming off its strongest quarterly advance in more than a year — contributing a half percentage point to the 2.4% increase in GDP.
“Obtaining capital will likely grow more challenging, and even as recession risks may be somewhat subsiding, growth in 2024 looks bleak and uncertainty is high, two conditions that suggest an unfavorable environment” for new capital expenditures, Wells Fargo & Co. economists Tim Quinlan and Shannon Seery said in a note.
Recent purchasing managers surveys also underscore a lack of momentum in the industrial sector. The latest S&P Global survey of US manufacturers showed a gauge of new orders contracted for a fourth month in August.
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