Share
May 25, 2018 3:30 PM, EDT

Capital-Equipment Orders Rise in Sign of Resilient Demand

Patrick T. Fallon/Bloomberg News

Orders placed with U.S. factories for business equipment rebounded in April even as the prior month’s figure was revised downward, indicating resilient demand at the start of the second quarter, Commerce Department figures showed May 25.

Highlights of April Durable Goods Orders

• Non-military capital goods orders excluding aircraft rose 1% month over month (estimated 0.7% gain) after falling 0.9% the prior month (revised from 0.4% drop); figure is proxy for business investment.

• Shipments of those goods, used to calculate gross domestic product, rose 0.8% (estimated 0.4% increase) after a revised 0.7% decrease (prev. 0.8% drop).

• Bookings for all durable goods, or items meant to last at least three years, fell 1.7% (estimated 1.3% drop) following 2.7% increase.

Key Takeaways

Outside of declines in machinery and civilian aircraft, the gain in orders was fairly broad-based, spanning computers, electrical equipment and metals.

RELATED: Trump’s China tariffs will pinch US consumers, retailers warn

RELATED: American factories struggle to increase productivity

While the figures are typically volatile, the latest report indicates business spending continues to expand at a healthy pace.

Business investment, joining consumer spending, may help support a projected rebound in economic growth this quarter as demand gets a boost from lower taxes for companies and individuals. At the same time, rising input costs, along with President Donald Trump’s tariffs on imported metals and threats of other levies, pose risks for corporations’ investment plans.

Aircraft orders weighed on total bookings: Boeing Co., the Chicago-based aerospace company, said it got 78 orders for aircraft in April, down from 197 the prior month. The May 25 government report showed that orders for civilian aircraft and parts fell 29% in April after surging 60.7% in March.

According to GDP figures released in April, spending on business equipment rose at a 4.7% annualized pace in the first quarter, after surging 11.6% in the previous three months. It accounted for 5.8% of nominal GDP.

Other Details

• Excluding transportation-equipment demand, which is volatile, durable-goods orders rose 0.9% (median estimate 0.5% gain) after upwardly revised 0.4% gain.

• Orders for machinery fell 0.8% following a 3.2% drop.

• Motor vehicles and parts orders were up 1.8%; electrical equipment, appliances and parts advanced 2.6%.

• Fabricated-metal product orders rose 2%, primary metals up 1.3%.

• Durable goods inventories rose 0.3%.

• Defense capital-goods orders increased 3.1% following a 21.2% plunge.