Orders for US business equipment rise for an eighth month

Orders placed with U.S. factories for business equipment rose in December for an eighth straight month, underscoring steady improvement in capital investment that’s been a bright spot for the economy.

Core capital goods orders, which exclude aircraft and military hardware, rose 0.6% after an upwardly revised 1% advance in November, Commerce Department data showed Wednesday. The median forecast in a Bloomberg survey of economists called for a 0.5% gain, after a previously reported 0.5% November advance.

The broader measure of bookings for all durables, or goods meant to last at least three years, increased 0.2%, less than forecast as orders for commercial aircraft and defense hardware declined.

The capital goods figures corroborate other recent data that show manufacturing is exceeding expectations and investment in equipment remains strong, helped in part by ultra-low borrowing costs. While supply-chain constraints and workforce issues, such as workers calling out sick, have been restraints on production, still-lean inventories should continue to drive output in the coming months.

“The manufacturing sector recovery is robust, supported by strong domestic spending in goods and the global industrial upturn, led by China,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. “We see no reason to expect this favorable outlook to change in the near-term, but the fate of the U.S. economy overall is much more contingent on the services sector, still hamstrung by Covid.”

Shipments of core capital goods, used to form estimates of business equipment investment within the government’s gross domestic product report, climbed 0.5% for a second month. Over the most recent three months, these shipments increased at a 17.5% annualized pace compared with a 33.1% rate at the end of the third quarter.

The government’s first estimate of fourth-quarter GDP on Thursday is forecast to show the economy expanded at a 4.2% annualized pace. In the previous three months, GDP surged a record 33.4% after the worst quarterly setback since the 1940s as the economy shut down to contain the coronavirus.

Compared with the prior year, core capital goods orders rose 1.8% last year, while total durable goods bookings declined 7%.

The report showed a December pickup in orders from a month earlier for machinery, metals, communications equipment and motor vehicles. Orders for transportation equipment sank on fewer bookings of commercial aircraft despite Boeing Co. reporting that it received 90 orders during the month, the most in two years.

Other data points showed that manufacturing output strengthened in December. Industrial production increased 1.6% in the month, the most since July, while a separate manufacturing index expanded at the fastest pace since 2018.