US business spending plans weak in July

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US business spending plans weak in July

WASHINGTON - A gauge of planned spending by US businesses fell in July for a second straight month, suggesting a slowing growth trend in the factory sector, even though demand for long lasting manufactured goods surged.

By (Reuters)

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Published: Fri 24 Aug 2012, 7:52 PM

Last updated: Tue 7 Apr 2015, 11:48 AM

The Commerce Department said on Friday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, declined 3.4 percent after falling 2.7 percent in June.

Economists polled by Reuters had expected a 0.7 percent rise after a previously reported 1.7 percent decline in June.

This category tends to weaken at the start of a quarter, but it was the second straight month of weakness, hinting at a cooler growth pace in manufacturing, a sector that has shouldered the economy’s recovery from the 2007-09 recession.

It could favor additional monetary easing by the Federal Reserve next month, even though other data on jobs, consumer spending and the housing sector suggested an improvement in the economy ea r ly in the third quarter after growth slowed in the April-June period.

“The problem is the core business investment, which suggests that capital equipment spending in the fourth quarter will be very soft, perhaps even negative,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“Firms are just preparing for the worst due to various issues like Europe and year-end tax issues. They want to be safe than sorry,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Shipments of non-defense capital goods orders excluding aircraft, used to calculate equipment and software spending in the gross domestic product report, were flat after rising 1.5 percent in June.

US Treasury debt prices added to gains while stock index futures held on to small losses.

Minutes of the US central bank’s July 31-Aug . 1 meeting suggested further monetary stimulus could come soon unless economic data pointed to a “substantial” and “sustainable” strengthening in the pace of the recovery.

Officials at the Fed meet on Sept. 12-13. Fed Chairman Ben Bernanke’s speech at the central bank’s high-profile gathering in Jackson Hole, Wyoming, at the end of next week c ould offer clues on the near-term course of monetary policy.

Aircraft orders soar

Strong demand for civilian aircraft bolstered durable goods orders, which rose 4.2 percent after a 1.6 percent increase in June. Last month’s increase was the largest since December and beat economists’ expectations for a 2.4 percent rise.

Durable goods are items from toasters to aircraft that are meant to last at least three years. Orders excluding transportation fell 0.4 percent, dropping for a second month in the a row. Overall orders last month were buoyed by a 14.1 percent jump in transportation equipment as demand for civilian aircraft surged 53.9 percent. Boeing received orders for 260 aircraft, up from 24 planes in June, according to information posted on the plane maker’s website.

United Airlines placed an order of 150 planes last month.

The aircraft surge was complemented by a 12.8 percent increase in motor vehicle orders, the largest increase since July last year.

Away from transportation, details of the report were mixed with gains in new orders for primary metals, computers and electronic product.

There were declines in new orders for fabricated metal products, electrical equipment and appliances and machinery.

Unfilled orders for overall goods increased 0.8 percent, indicating factories will remain busy for a while. U nfilled orders ros e 0 .4 percent in June. The stock of unsold long-lasting manufactured goods inc reased 0.7 percent.



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