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February 27, 2020 9:15 AM, EST

Orders for US Business Equipment Jumped at Start of Year

A construction site in downtown Nashville in 2019.A construction site in downtown Nashville in 2019. (Eilon Paz/Bloomberg News)

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Orders placed with U.S. factories for business equipment increased in January by the most in a year, representing a respite in the corporate investment slowdown that weighed on the economy last year.

So-called core capital goods orders, which exclude aircraft and military hardware, jumped 1.1% after a 0.5% decline the prior month that was less than initially estimated, according to Commerce Department figures released Feb. 27. The median forecast in a Bloomberg survey called for a 0.1% increase in January.

The broader measure of bookings for all durable goods, or items meant to last at least three years, fell 0.2% on fewer motor vehicle orders. A separate report from the Labor Department showed initial jobless claims increased for a third week while remaining low by historical standards.

Shipments of core capital goods, a figure used in gross domestic product calculations, also increased 1.1% in January, the most in a year. In the Commerce Department’s revised figures on fourth-quarter GDP, also issued Feb. 27, nonresidential fixed investment in equipment declined an annualized 4.4%, the largest decrease in four years and weaker than the 2.9% pace initially reported.

Host Seth Clevenger went to CES 2020 in Las Vegas and met with Rich Mohr of Ryder Fleet Management Solutions and Stephan Olsen of the Paccar Innovation Center to discuss how high-tech the industry has become. Listen to a snippet above, and to hear the full episode, go to RoadSigns.TTNews.com.

While the durables figures are volatile from month to month, the increase in capital spending may alleviate concern that the retrenchment at the end of 2019 isn’t deepening in the current quarter. At the same time, while a pause in the U.S.-China trade war is welcome by businesses, the negative effects of the coronavirus on supply chains and export demand has introduced another layer of uncertainty.

The headline durable-goods figure was depressed by the volatile transportation category, reflecting weak bookings for motor vehicles. One surprise was a surge in orders of civilian aircraft and parts, considering Boeing Co. on Feb. 11 said it received no aircraft orders in January. A production halt on the company’s 737 Max will probably continue to weigh on the economy through the first half of the year.

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