Slowdown in U.S. business-equipment orders may weigh on growth

NEW YORK – An unexpected decline in U.S. orders for business equipment in May indicates cooling capital-goods investment may weigh on second-quarter economic growth, Commerce Department data showed Monday.

Highlights of Durable Goods (May)

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Orders for non-military capital goods excluding aircraft fell 0.2 percent (which were previously estimated to experience a 0.4 percent gain) after a 0.2 percent increase in April. Shipments of those goods, which are used to calculate gross domestic product, fell 0.2 percent after a 0.1 percent April gain. Bookings for all durable goods fell 1.1 percent (which was estimated to drop 0.6 percent) following a 0.9 percent decline in April; excluding transportation-equipment demand, which is volatile, orders rose 0.1 percent (which were estimated to increase 0.4 percent.)

Key Takeaways

The broad slowdown in equipment orders and shipments raises the risk that business investment will provide less of a boost than anticipated to the economic rebound this quarter, leaving the heavy lifting to household spending. The outlook for capital-goods production is clouded by cooling automobile sales, while overseas markets – though improving – are yet to show the kind of demand acceleration that would spur exports of U.S.-made goods.

Other Details

• Orders for non-defense capital goods excluding aircraft dropped most since December.
• Durable-goods orders fell most they have fallen since November.
• Orders for motor vehicles and parts rose 1.2 percent which compares with industry data showing sales of cars and light trucks slowed in May for the fourth time in the past five months.
• Orders for fabricated metal products fell 0.2 percent after a 1 percent decline; machinery orders rose 0.6 percent.
• Computer and electronic-products orders decreased 0.2 percent.
• Bookings for civilian aircraft and parts dropped 11.7 percent and defense capital-goods orders fell 8.2 percent.
• Durable-goods inventories rose 0.2 percent.
• Unfilled orders for non-defense capital goods excluding aircraft advanced 0.2 percent.

Shobhana Chandra is a reporter for Bloomberg News.