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October 1, 2018 12:00 AM, EDT

Business-Equipment Orders Show First Decline in Five Months

Commodities graph Bloomberg News

Orders placed with U.S. factories for business equipment unexpectedly declined in August, the first drop in five months, marking a pause from solid gains in manufacturing, Commerce Department figures showed Sept. 27.

Highlights of Durable Goods for August

Nonmilitary capital goods orders excluding aircraft fell 0.5% month over month (est. 0.4% rise) after climbing 1.5% the prior month. The figure is a proxy for business investment, Shipments of those goods, used to calculate gross domestic product, rose 0.1% (est. 0.5% increase) after a 1.1% advance The broader measure of bookings for all durable goods, or items meant to last at least three years, jumped 4.5% (est. 2% gain), the most since February, after a 1.2% decrease. The increase reflects large rebounds in aircraft orders and military bookings.

While the monthly data on business-equipment orders typically are volatile, and August’s dip follows a strong July, analysts are watching for signs that a widening trade war is spurring companies to slow investment. Corporations have cited risks from higher prices for steel and aluminum, with Ford Motor Co. saying that metals tariffs reduced its profits by $1 billion. General Motors Corp. also has cited higher metals costs as dimming its outlook.

A more persistent slowdown in business spending would weigh on what’s expected to be a solid second half for the economy, after corporate investment, boosted by tax cuts, supported expansion earlier this year. The Commerce Department’s third and final gross domestic product estimate for the second quarter showed an unrevised annualized pace of 4.2% growth, the fastest since 2014, according to a separate report Sept. 27.

The broader jump in durable-goods orders in August reflects bookings for civilian aircraft and parts, also a volatile category, which surged 69.1% after a 29.1% drop in July. Boeing Co. previously reported that the plane manufacturer received 99 orders in August, up from 25 in July.

Excluding transportation items, durable-goods orders rose 0.1%, less than forecasts for 0.4%, after a revised 0.2% gain. Orders for primary metals rose 0.9%, fabricated metal products unchanged, machinery up 0.1% Bookings for motor vehicles and parts fell 1%; communications equipment up 0.7%, computers and related products down 0.8%. Defense capital-goods orders jumped 44.4%, the most since February. Durable goods inventories fell 0.4%, the biggest drop since June 2016.