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7/25/2014 8:40:00 AM Write a Letter to the Editor Write a letter to the Editor

Orders for U.S. Capital Goods Rose After Revised May Drop

Daniel Acker/Bloomberg News

Orders for U.S. business equipment rose in June following a revised drop the prior month, indicating corporate investment remains stop-and-go and could hold back economic growth.

Bookings for non-military capital goods excluding aircraft climbed 1.4% after a 1.2% decrease in May that was previously reported as a 0.7% gain, according to data from the Commerce Department.

Demand for all durable goods - items meant to last at least three years - increased 0.7%.

Companies are waiting to ramp up capacity until they believe demand is sustainable. As an improving job market will probably prompt consumers to keep replacing older cars, appliances and computers, a sign manufacturers will remain busy and give growth a boost in the second half of the year.

“We’re seeing a continuation of the pattern we’ve seen, which has been relatively subdued growth in capital goods and equipment spending,” said Ryan Wang, an economist at HSBC Securities USA Inc.

“We’ve seen that businesses have been a bit more willing to increase their workforce this year, but capital investment decisions are based on longer-term expectations for final demand, and I think that businesses are probably going to remain cautious for now,” said Wang.

The median forecast of 82 economists surveyed by Bloomberg News projected total durable goods orders would rise 0.5%. Estimates ranged from a decline of 1% to an increase of 2.5%. The May reading was revised to show a 1% drop compared with a previously reported 0.9% decrease.

By Bloomberg News

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