U.S. factory orders slip; core capital goods orders revised up

FAN Editor
A man walks his dog past a mural depicting factory workers in Chicago's historic Pullman neighborhood.
A man walks his dog past a mural depicting factory workers in the historic Pullman neighborhood in Chicago November 20, 2014. REUTERS/Andrew Nelles/File Photo

December 4, 2017

WASHINGTON, (Reuters) – New orders for U.S.-made goods fell less than expected in October and shipments of core capital goods were much stronger than previously reported, pointing to sustained strength in the manufacturing sector.

Factory goods orders dipped 0.1 percent amid a drop in demand for both civilian and defense aircraft, the Commerce Department said on Monday. September data was revised to show orders increasing 1.7 percent instead of the previously reported 1.4 percent rise.

Economists had forecast factory orders falling 0.4 percent in October.

Orders for non-defense capital goods excluding aircraft -seen as a measure of business spending plans – rose 0.3 percent in October instead of the 0.5 percent drop reported last month. Orders for the so-called core capital goods surged 2.3 percent in September.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, advanced 1.1 percent in October instead of the previously reported 0.4 percent rise. Core capital goods shipments increased 1.3 percent in September.

Business spending on equipment has increased strongly this year as corporations anticipated hefty tax cuts from the Trump administration. Republicans in the U.S. Congress have approved a broad package of tax cuts, including slashing the corporate income tax rate to 20 percent from 35 percent.

Business spending on equipment increased at its fastest pace in three years in the third quarter. That is helping to underpin manufacturing, which makes up about 12 percent of the U.S. economy. Manufacturing is also being supported by a weakening dollar, which has lost about 7 percent of its value against the currencies of the United States’ main trading partners.

Factory activity is also being boosted by businesses replenishing depleted inventories and strengthening global demand, helping to offset a slowdown in spending on mining exploration, wells and shafts.

In October, orders for machinery rose 1.9 percent after a 0.8 percent gain in September. Mining, oil field and gas field machinery orders fell 1.4 percent after soaring 20.2 percent in September.

Orders for transportation equipment declined 4.2 percent, reflecting an 18.5 percent plunge in civilian aircraft orders and a 7.6 percent drop in bookings for defense aircraft. Transportation equipment orders rose 4.7 percent in September.

Motor vehicle orders increased 1.3 percent after being unchanged in September.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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