New orders for key U.S.-made capital goods increased more than expected in August and shipments raced to their highest level in nearly six years, suggesting a rebound in business spending on equipment was underway after a prolonged slump.
Federal Reserve Chair Jerome Powell this week stressed the need for more fiscal stimulus, telling lawmakers on Thursday that it could make the difference between continued recovery and a much slower economic slog. Another rescue package appears unlikely before the Nov. 3 presidential election. Core capital goods orders last month were boosted by increased demand for machinery, primary metals and computers and electronic products. But orders for fabricated metals products and electrical equipment, appliances and components fell.
Business investment tumbled at a record 26per cent annualized rate in the second quarter, with spending on equipment collapsing at an all-time pace of 35.9per cent. Investment in equipment has contracted for five straight quarters. But the economy is far from being out of the woods. Government loan programs to help businesses and income supplements for the tens of millions of unemployed have either lapsed or are close to expiring.
Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 0.4per cent in August after jumping 11.7per cent in July. Durable goods orders were supported by a 0.5per cent rise in orders for transportation equipment, though demand for motor vehicles and defense aircraft eased.