Business investment in equipment fell by the most in 2-1/2 years in the fourth quarter.Īccording to a Reuters survey of economists, GDP likely increased at a 2.0% annualized rate in the January-March period. Most economists expect a small decline in business spending on equipment when the government publishes its advance estimate of GDP for the first quarter on Thursday. The dollar fell against a basket of currencies. We anticipate a further tightening in banks' lending standards to take hold." "Conditions for new capital investment continue to grow less favorable. "Equipment spending was likely a bit weaker in the first quarter," said Shannon Seery, an economist at Wells Fargo in New York. Shipments of nondefense capital goods, which also go into the calculation of GDP, rebounded 3.6% after slumping 1.1% in February. Core capital goods shipments are used to calculate equipment spending in the gross domestic product measurement. Shipments of core capital goods decreased 0.4% in March after falling by a similar margin in February. The inventory cycle is also turning, with restocking by businesses slowing to match cooling demand. Spending is also shifting away from goods to services, while sluggish global demand is crimping exports. economy, is already reeling from the Federal Reserve's fastest interest rate hiking campaign since the 1980s to tame inflation. Manufacturing, which accounts for 11.3% of the U.S. That is spilling over to the manufacturing industry. Inventories of these goods rose 0.2%.īusiness investment is under threat from a tightening in credit following recent financial market turmoil, which could make funding less accessible to small firms and households. Orders for machinery, primary metals and fabricated metal products barely rose.īut unfilled orders of core capital goods continued their steady decline, indicating there was less in the pipeline to drive activity. Orders for electrical equipment, appliances and components increased 0.8%, while bookings for computers and electronic products surged 1.9%. Economists polled by Reuters had forecast core capital goods orders would slip 0.1%. Data for February was revised down to show a 0.7% drop in these so-called core capital goods orders instead of the previously reported 0.1% dip. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4% last month. "The economy isn't going off the rails yet," said Christopher Rupkey, chief economist at FWDBONDS in New York. Even though business spending on equipment weakened, demand remained strong for goods like computers and electronic products as well as electrical equipment, appliances and components. But the economy appears to have stayed on a solid growth path last quarter, with other data from the Commerce Department on Wednesday showing the goods trade deficit narrowed sharply due to a rebound in exports.
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