US core capital goods orders decline for first time in a year

Orders placed with U.S. factories for business equipment unexpectedly declined in February for the first time in a year, likely representing a pause in capital spending after a sharp rise a month earlier.

The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, decreased 0.3% after an upwardly revised 1.3% gain a month earlier, Commerce Department figures showed Thursday. The median estimate in a Bloomberg survey of economists called for a 0.5% advance. 

Bookings for all durables—or items meant to last at least three years—fell 2.2%, the first decline in five months, reflecting a drop in orders for commercial aircraft. Excluding transportation, durable goods orders dropped 0.6%.

Even with the surprise softness in orders last month, sustained monthly declines would be needed to signal a shift in what has otherwise been a healthy capital spending environment. One risk is that Federal Reserve interest-rate hikes may start to diminish corporate investment appetites.

Separate government data on Thursday showed applications for unemployment benefits dropped by 28,000 to 187,000 last week, the lowest since 1969 and underscoring persistent tightness in the job market.

The decrease in demand for business equipment was relatively broad-based, including weaker bookings for metals, machinery and communications equipment.

Core Shipments

Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, rose 0.5% after a 2.1% surge in January.

Meantime, bookings for commercial aircraft slumped more than 30%, the government’s data showed. Boeing Co. reported 37 orders in February, down from 77 a month earlier. 

Orders for motor vehicles and parts decreased 0.5% in February following a 0.7% decline a month earlier.

The report also showed unfilled orders for all durable goods rose 0.4%, which included 0.8% increases in both motor vehicles and commercial aircraft.