Skip to main content

The Globe and Mail

U.S. business spending plans rebound, but shipments weak

In this Feb. 29, 2008 file photo, the fuselage of an R-44 helicopter awaits the top to its crate amid several other crated aircraft awaiting shipment at the Robinson Helicopter manufacturing plant in Torrance, Calif.

Reed Saxon/AP

A gauge of planned U.S. business spending increased by the most in five months in October, but a fourth straight month of declines in shipments underscored the damage that fears of tighter fiscal policy next year are inflicting on the economy.

The Commerce Department said on Tuesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rebounded 1.7 per cent last month after falling 0.4 per cent the prior month.

Economists had expected a 0.5 per cent decline.

Story continues below advertisement

Shipments of the so-called core capital goods orders, used to calculate equipment and software spending in the gross domestic product report, slipped 0.4 per cent. It was the fourth consecutive of declines in shipments.

"Capital spending will remain a drag on the economy in the fourth quarter," said Andrew Grantham, an economist at CIBC World Markets in Toronto.

Businesses are cutting back on capital spending, wary of automatic government spending cuts and tax increases, known as the fiscal cliff, that are scheduled to kick in early next year unless the U.S. Congress and the Obama administration can agree on a plan to cut the budget deficits.

The fiscal cliff could drain about $600-billion (U.S.) from an already fragile economy. Business spending is also being undermined by the long-running debt problems in Europe and slowing global demand, especially in China.

The Commerce Department said there was no indication that superstorm Sandy, which lashed the East Coast in late October, had an immediate impact on factories in that region.

Despite the headwinds, the manufacturing sector remains on a modest growth path after a strong run that helped to pull the economy out of the 2007-09 recession.

Durable goods orders were unchanged in October as gains in machinery, fabricated metal products, and computer and electronic products offset the drag from automobiles, defense and civilian aircraft.

Story continues below advertisement

Economists had forecast orders for durable goods, items from toasters to aircraft that are meant to last at least three years, falling 0.6 per cent last month after rising 9.2 per cent in September.

Excluding transportation, orders rose 1.5 per cent after increasing 1.7 per cent in September.

Last month, orders for transportation equipment fell 3.1 per cent. Defense aircraft orders dropped 4.3 per cent after surging 32.1 per cent in September.

Orders for automobiles declined 1.6 per cent after falling 1.9 per cent the prior month. Civilian aircraft orders dived 5.8 per cent last month after soaring in September.

While Boeing received nine aircraft orders more than in September, the planes ordered in October were less-expensive models, according to information posted on the plane maker's website.

Report an error

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Please note that our commenting partner Civil Comments is closing down. As such we will be implementing a new commenting partner in the coming weeks. As of December 20th, 2017 we will be shutting down commenting on all article pages across our site while we do the maintenance and updates. We understand that commenting is important to our audience and hope to have a technical solution in place January 2018.

Discussion loading… ✨