Durable-goods orders drop 1.3% in May, but business investment picks up in reassuring sign - MarketWatch

Bloomberg News

Boeing’s struggles are part of a broader malaise in the U.S. manufacturing sector as a trade war with China drags on.

The numbers: Orders for U.S. durable goods fell in May for the third time in four months, held down by a canceled deal for Boeing’s troubled 737 Max jet. Yet business investment perked up in a somewhat reassuring sign that companies haven’t frozen spending amid a tense trade fight with China and signs of a slower U.S. economy.

Orders for long-lasting goods slid 1.3% last month, the government said Wednesday. Economists polled by MarketWatch had forecast a 1% decline.

Orders in April were also weaker than initially reported.

Yet if cars and planes are stripped out, orders actually rose 0.3% in April to break a string of three declines in a row. Transportation often exaggerates the ups and downs in orders because of lumpy demand from one month to the next.

Read: Weak unions, globalization not to blame for shrinking slice of income pie for workers

What happened: Orders for commercial aircraft sank 28% in May. Boeing BA, +0.32%  canceled a large order of Max planes destined for India after a struggling carrier ceased operations. The company has received barely any orders since Max flights were suspended globally after a pair of deadly crashes earlier this year.

Orders for autos rose 0.6% in May. Orders also increased for heavy machinery, primary metals, computers and networking gear.

A key measure of business investment, known as core orders, advanced 0.4% in May to mark the biggest increase since the first month of the year.

Businesses have cut back on spending in 2019 as they try to navigate the biggest trade dispute in decades. Many U.S. companies rely heavily on raw or partly finished Chinese materials to make their products and China is a critical market for some American farmers such as those produce soy.

The pace of investment in the 12 months ended in May rose slightly to 1.4% from 1.2%, but it’s still quite weak.

The 2.1% drop in durable-goods orders in April, as originally reported, was revised down to show a steeper 2.8% erosion.

Big picture: Import tariffs imposed by U.S. and China have hurt both countries and harmed the global economy by disrupting supply chains. Many firms are waiting to see if the trade dispute is resolved soon before committing themselves to big spending plans.

Read: Trump tariffs on China boomerang on American manufacturers, RBC contends

The damage has been most pronounced in the export-heavy U.S. manufacturing sector, but the weakness now appears to be spreading to other parts of the economy. Economists warn the U.S. could suffer further if the trade fight drags on and the tariffs take full effect.

Read: Why long periods of the U.S. going without recession may be bad for the economy

Also Read: MarketWatch interview with Deutsche Bank’s Jim Reid on a crisis-filled future

Market reaction: The Dow Jones Industrial Average DJIA, +0.20% and S&P 500 index SPX, +0.29% were set to open higher. The S&P set a new record last Thursday and the Dow almost got there. Stocks have been surging on the growing expectation the Federal Reserve will trim interest rates in the near future.

Read: Federal Reserve boss says the bank is ‘grappling’ with whether to cut interest rates

The 10-year Treasury yield TMUBMUSD10Y, +1.55% rose slightly to 2.03%. Yields have tumbled from a seven-year high of 3.23% last October owing to a slower economy.

Let's block ads! (Why?)

https://www.marketwatch.com/story/durable-goods-orders-drop-13-in-may-but-business-investment-picks-up-in-reassuring-sign-2019-06-26

2019-06-26 12:31:00Z
52780321467621

Bagikan Berita Ini