According to a Commerce Department report released Oct. 27, orders for business equipment slipped 1.2% in September, marking a second consecutive decline. Analysts explained that lackluster international economic context gave U.S. companies little hope for growth.
According to the report, demand for non-defense capital goods slipped 0.3 percent in September following another slump in August when demand fell 1.6 percent, which is twice as experts estimated. Additionally, the bookings for durable goods, i.e. goods that are designed to last at least three years such as mobile phones, refrigerators, and washing machines sank 1.2 percent.
Analysts argued that inventories need to be worked off and global demand for U.S. goods needs to be revived before corporate investment can follow an upward trend. But while demand for some U.S. good slumped in the past few months, car purchases helped manufacturing industry amid low gas prices.
“We’re seeing the lingering impact of the global uncertainty that erupted over the summer,”
noted Millan Mulraine from the research firm TD Securities LLC in New York.
Mulraine added that global uncertainty would not promote Q3 growth, so we shouldn’t expect large business investments. Analysts expected that demand for capital goods including computers, communications technology, and engines except for aircrafts, would grow at least 0.2 percent in September.
Nevertheless, shipments for non-military capital goods rose 0.5 percent in September following a 0.8 percent decrease a month before. Experts expected a 0.4 percent drop in August.
While in September durable goods demand shrank 1.5 percent, in August orders fell 3 percent. Commercial aircraft fared even worse. The demand plunged 37 percent in September, after an 11 percent drop in August. Boeing reported that it received only 29 orders for crafts last month, while in the month before it received 52.
Inventories of durable goods shrank 0.3 percent last month, and unfulfilled orders slipped 0.6 percent.
But not just orders for business equipment slipped 1.2% in September, industrial production also fell 0.2 percent. Analysts at the Federal Reserve argue that weak global demand for U.S. commodities puts a strain on domestic producers.
Yet, the good news comes from the automotive industry. According to the Commerce Department, car demand rose 1.8 percent in September. Plus, an industry watchdog reported that the demand for cars and light trucks recorded the strongest annualized rate in a decade.
Officials reports also show that consumer sentiment, which accounts for 70 percent of economic activity in the U.S. may experience a strong rebound amid optimistic labor expectations and cheap gasoline prices.
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