US core capital goods orders; shipments fall in February

WASHINGTON: New orders for key US-made capital goods fell in February after nine straight monthly increases, suggesting some cooling in business spending on equipment in the first quarter.

While part of the surprise decline reported by the Commerce Department on Wednesday could be because of last month's cold snap, demand for these goods had been gradually slowing. Still,

capital expenditure is seen supported by the White House's $1.9 trillion COVID-19 pandemic rescue package.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.8% last month, the Commerce Department said on Wednesday. These so-called core capital goods orders gained 0.6% in January.

Economists polled by Reuters had forecast core capital goods orders rising 0.5%.

Orders surged 8.5% year-on-year in February. The year-long pandemic has boosted demand for goods, underpinning manufacturing, which accounts for 11.9% of the US economy.

In February, core capital goods orders were weighed down by machinery and primary and fabricated metal products, as well computers and electronic products. But orders for electrical equipment, appliances and components rose 0.2%.

Shipments of core capital goods dropped 1.0% last month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. They increased 1.9% in January. February's drop was likely due to bitterly cold weather in many parts of the country.

The unseasonably cold temperatures hammered retail sales, factory production, homebuilding and house sales. Despite the weather-related decline in activity, economists have not trimmed their lofty GDP growth estimates for the first quarter as they anticipate a sharp rebound in March.

The massive fiscal stimulus is also seen spurring faster economic growth this quarter. The economy is forecast growing by as much as a 7.5% annualized rate in the January-March quarter after expanding at a 4.1% pace in the final three months of 2020. Business investment on equipment is expected to contribute to stronger economic growth in the first quarter after logging double-digit growth in each of the last two quarters.

Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, decreased 1.1% in February after jumping 3.5% in January.

Durable goods orders were pulled down by a 1.6% drop in orders for transportation equipment, which followed a 7.5% surge in January.

But orders for civilian aircraft soared 103.3%. Boeing reported on its website that it had received 82 aircraft orders last month compared to only four in January. That included 39 orders for the 737 MAX jets. The government late last year lifted a 20-month grounding of the aircraft that came after two crashes in Indonesia and Ethiopia.

Orders for motor vehicles and parts tumbled 8.7% in February after falling 0.9% in January.