U.S. New orders for major capital goods created by the company increased more than expected in August and demand for the previous month was stronger than previous estimates, indicating that business spending on equipment continues to improve after a long-term decline.
In a bullish report from the Commerce Department on Friday, however, there has been no change in perceptions that the recovery of the economy from the recession of COVID-19 is slowing down and that government money is slowing to help millions of unemployed Americans. New coronavirus cases are on the rise in some parts of the country. As retail sales slow down already, consumer spending will decline.
Federal Reserve Chair Jerome Powell stressed the need for more fiscal stimulus this week, telling lawmakers Thursday that it could make the difference between a sustained recovery and a much slower economic slag. 3 Nov. A second defense package before the presidential election looks unlikely.
The Commerce Department said orders for defense capital goods other than aircraft, a closely watched proxy for business spending plans, rose 1.8% last month. The data for July was revised to show orders for this so-called core capital goods, an increase of 2.5% instead of the previous estimate of 1.9%.
Economists surveyed by Reuters forecast 0.5% of major capital goods orders in the capital Gust.
Last month, orders for core capital goods offenses saw an increase in demand for machinery, primary metals, computers and electronic products. But orders for forged metal products and electrical appliances, devices and components fell.
US stocks fell. The dollar was higher against the basket of currencies. U.S. Treasury prices rose.
Expect a strong third quarter
Shipments of major capital goods have increased by 1.5% in the last month. Core capital goods shipments are used to calculate the cost of equipment in the government’s GDP measurement. They rose 2.8% in July. Business investment fell to a record 26% year-on-year in the second quarter, with equipment spending falling at an all-time high of 35.5%. The investment in equipment is directly contracted in five quarters.
Economic activity boomed sharply during the summer as businesses reopened after a mandatory shutdown in mid-March to slow the spread of coronavirus. After falling to .71.7% in the April-June period, GDP is expected to grow at a record annual rate of 8% in the third quarter, the worst performance since the government began recording in 1947.
But fading monetary stimulus is providing a cloud over the prospect of growth in the fourth quarter. Goldman Sachs further downgraded its GDP growth forecast for the fourth quarter to 6% on Wednesday, citing a lack of further financial support.
Durable goods, items ranging from toasters to aircraft that last for three years or more, orders rose 0.4% in August and 11.7% in July. Durable goods orders were supported by a 0.5% increase in transport equipment orders, although demand for motor vehicles and defense aircraft declined.
There were no reports of civilian aircraft in the second month of August.
Boeing has struggled with cancellations as airlines cut sharp demand for air travel due to the epidemic. The grounding of Boeing’s best-selling 737 Max jet since March 2019 after two crashes in Indonesia and Ethiopia also weighs on the company.
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