Skip to main content

U.S. Business U.S. core capital goods orders surge; weekly trends in jobless claims remain consistent

New orders for U.S.-made capital goods increased by the most in eight months in March, hitting their highest level on record and brightening the outlook for manufacturing and the economy.

While other data on Thursday showed the number of Americans filing claims for unemployment benefits last week was the largest in 19 months, that did not change views of a tightening labour market that is increasingly running out of workers. The reports underscored the economy’s enduring strength as it prepares to celebrate a record 10 years of growth in July.

“Company CEOs may have feared recession in surveys taken at the start of the year, but those concerns have faded as businesses bring on new equipment to meet the demand for the goods and services they provide their customers,” said Chris Rupkey, chief economist at MUFG in New York.

Story continues below advertisement

The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.3 per cent to an all-time high of $70.0 billion, powered by a jump in demand for computers and electronic products.

The increase in these so-called core capital goods orders was the biggest since last July and followed a 0.1 per cent gain in February. Economists polled by Reuters had forecast core capital goods orders only nudging up 0.1 per cent in March. They increased 2.8 per cent on a year-on-year basis.

But shipments of core capital goods slipped 0.2 per cent in March after gaining 0.2 per cent in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

While March’s drop in shipments suggested business spending on equipment slowed down in the first quarter that did not have an impact on economists’ growth estimates for the period.

According to a Reuters survey of economists, gross domestic product probably increased at a 2.0 per cent annualized rate in the first quarter. The economy grew at a 2.2 per cent pace in the October-December period. The government will publish its snapshot of first-quarter GDP on Friday.

Business spending on equipment is expected to have slowed because of the delayed impact of sharp drops in oil prices toward the end of 2018 and fading depreciation provisions in the 2018 tax bill, as well as supply chain disruptions caused by Washington’s trade war with China.

The dollar rose to a near two-year high against the euro, while U.S. Treasury prices fell. Stocks on Wall Street were trading lower amid a mixed batch of corporate earnings.

Story continues below advertisement

BROAD ORDER GAINS

In March, orders for machinery rose 0.3 per cent after declining 0.7 per cent in February. Orders for computers and electronic products soared 2.2 per cent. There were also increases in orders for electrical equipment, appliances and components. But orders for primary metals fell, as did those for fabricated metal products.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, shot up 2.7 per cent in March after declining 1.1 per cent in the prior month. Orders for transportation equipment rebounded 7.0 per cent after falling 2.9 per cent in February.

Orders for motor vehicles and parts rose 2.1 per cent in March. Orders for non-defense aircraft jumped 31.2 per cent after plunging 25.4 per cent in February.

Boeing reported on its website that it received 44 aircraft orders, up from only five in February. There were no orders booked for its troubled 737 MAX aircraft. Boeing’s fastest-selling 737 MAX jet was grounded in March after two fatal plane crashes in five months.

In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits jumped 37,000 to a seasonally adjusted 230,000 for the week ended April 20. The increase was the largest since early September 2017.

Claims dropped to 193,000 in the week prior, which was the lowest level since September 1969. Economists had forecast claims rising to only 200,000 in the latest week. Claims tend to be volatile around this time of the year because of the different timings of Easter and Passover holidays, as well as spring breaks for schools and universities.

Story continues below advertisement

Despite the volatility, labour market strength remains intact. The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 4,500 to 206,000 last week.

“We see nothing in these data to change our view that the labour market is extremely tight and companies are highly reluctant to lay off workers,” said John Ryding, chief economist at RDQ Economics in New York.

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Discussion loading ...

Cannabis pro newsletter