U.S. core capital goods orders rise in July

by Lucia Mutikani

WASHINGTON (Reuters) – New orders for U.S.-made capital goods rose in July but at a slower pace from the previous month, suggesting businesses Spending on equipment could struggle

Orders for non-defense capital goods excluding aircraft, a closely watched measure of business spending plans, rose 0.4% last month, the Commerce Department said on Wednesday. Orders for these so-called core capital goods surged 0.9% in June.

Economists polled by Reuters had forecast a 0.3% rise in core capital goods orders.

Orders are slowing as the Fed’s aggressive monetary policy to fight inflation dampens demand. However, manufacturing, which accounts for 9% of the economy 11, is still supported by still low inventories of durable manufactured goods such as automobiles.

Orders for machinery, fabricated metal products, and computers and electronics increased in July. But orders for electrical equipment, appliances and components fell, as did orders for primary metals.

Core capital goods shipments rose 0.7% after rising 0.8% in June. Core capital goods shipments are used to calculate spending on equipment in the GDP measure.

Business spending on equipment fell at an annualized rate of 2.7% in the second quarter, the largest in two years. This, coupled with a slower pace of inventory buildup compared to the previous two quarters, resulted in a drop in GDP. The economy contracted 1.3% in the first half of the year.

Durable goods orders, from toasters to airplanes, expected to last three years or more, were unchanged in July after rising 2.2% in June.

A 0.7% decline in transportation equipment orders dampened them. Civil aircraft orders soared 14.5%. However, they were offset by a 49.8% plunge in defense aircraft orders. Boeing (NYSE: BA) reports on its website that it has received