April 26, 2018 12:00 PM, EDT

Orders for Capital Equipment in March Ease Unexpectedly

Natalie Behring/Bloomberg News

Orders placed with U.S. factories for business equipment eased unexpectedly last month after a smaller February advance, indicating a more moderate pace of capital spending, a Commerce Department report showed April 26.

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Highlights of March Durable Goods Orders

• Nonmilitary capital goods orders excluding aircraft fell 0.1% (estimated up 0.5%), after rising 0.9% (previously 1.4%) in February; Figure is proxy for business investment.

• Shipments of those goods, which are used to calculate gross domestic product, decreased 0.7% (est. up 0.3%); February revised down to a 1% gain (previously up 1.4%).

• Bookings for all durable goods, items meant to last at least three years, jumped 2.6% (est. 1.6% gain) after an upwardly revised 3.5% gain.

Key Takeaways

The decline in shipments of nondefense capital goods excluding aircraft was the largest since May 2016 and indicates business spending ended the first quarter on a weak note. Some economists may trim their tracking estimates for growth during the period. The Commerce Department will issue its advance estimate of first-quarter GDP on April 27.

While the setback may simply represent a pause in investment, businesses may be somewhat hesitant to spend as they assess U.S. trade policy after the implementation of tariffs on steel and aluminum.

At the same time, favorable tax policies, stable global growth and rising capacity constraints remain supportive to increased investment.

The Commerce Department’s report showed orders cooled for machinery, computers and electrical equipment.

Other Details

• Orders for machinery fell 1.7%, the most since April 2016.

• Bookings for computers and related products dropped 2.6%.

• Commercial aircraft orders jumped 44.5% after a 39.1% increase.

• Excluding transportation equipment, a volatile category, durable goods orders essentially were unchanged after a 0.9% increase.

• Orders for motor vehicles and parts edged up 0.1%.

• Durable-goods inventories rose 0.1%.

• Defense capital-goods orders increased 0.9%.

With assistance by Jordan Yadoo