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US business spending picking up

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Author: ReutersSun, 2017-03-26ID: 1490464627583012700WASHINGTON: New orders for US-made capital goods unexpectedly fell in February, but a surge in shipments amid demand for machinery and electrical equipment supported expectations for an acceleration in business investment in the first quarter. Manufacturing is recovering from a prolonged slump, driven by the energy sector, bucking a slowdown in the broader economy. The Federal Reserve last week described business investment as appearing to have “firmed somewhat.”“The evidence is building that manufacturing activity is on something of an upswing and that capital spending on business equipment is poised to advance for the second consecutive quarter,” said John Ryding, chief economist at RDQ Economics in New York.The Commerce Department said on Friday that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dipped 0.1 percent last month after rising 0.1 percent in January. That suggested a slowdown in business spending in the second quarter.Shipments of these so-called core capital goods jumped 1 percent after declining 0.3 percent in January. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product (GDP) measurement. Last month’s jump reflected increases in orders at the end of 2016.Economists polled by Reuters had forecast core capital goods orders rising 0.6 percent last month.Orders for machinery inched up 0.1 percent while shipments increased 0.9 percent. Orders for electrical equipment, appliances and components advanced 2.2 percent, the biggest increase in seven months, and shipments rose 1.5 percent.A recovery in oil prices from multi-year lows is driving demand for equipment in the energy sector, helping to lift the manufacturing sector.Manufacturing, which accounts for about 12 percent of the US economy is also being underpinned by a burst of confidence amid promises by the Trump administration to slash taxes for businesses, boost infrastructure spending and repeal some regulations.Details of the fiscal stimulus package, however, remain vague, resulting in a moderation in orders for equipment in the last couple of months. A separate report on Friday from data firm Markit showed its US manufacturing sector index fell in March to a five-month low.“Business optimism has been at cycle highs since the start of the year, but has yet to translate into commensurate strength in real activity,” said Sarah House, an economist at Wells Fargo Economics in Charlotte, North Carolina.Spending on equipment is expected to pick up after a 1.9 percent annualized growth pace in the fourth quarter. Still, that will likely be insufficient to offset the drag on GDP from slower consumer spending and a wider trade deficit.The Atlanta Fed is forecasting the economy growing 1 percent in the first quarter after expanding at a 1.9 percent pace in the final three months of 2016.Last month, a 4.3 percent jump in demand for transportation equipment offset the dip in core capital goods bookings and hoisted overall orders for durable goods. Durable goods’ orders rose 2.3 percent in January.Civilian aircraft orders soared 47.6 percent in February, driven by an increase in plane orders at Boeing.Orders for motor vehicles and parts fell 0.8 percent in February, while orders for defense aircraft declined 12.8 percent. There were increases in orders for primary metals, but orders for fabricated metal products fell, as did those for computers and electronic products.Unfilled orders for core capital goods increased 0.2 percent last month after rising 0.5 percent in January. Inventories of overall durable goods rose 0.2 percent last month.
Main category: Business & Economy

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