WASHINGTON: New orders for key US-made capital goods surged in June, suggesting some improvement in business investment, but economic growth is still expected to have slowed sharply in the second quarter amid weaker exports and a smaller inventory build.
Orders for these so-called core capital goods in June increased across the board, with demand for machinery rising by the most in nearly 1-1/2 years. Economists polled by Reuters had forecast core capital goods orders would gain 0.2 per cent in June. The government will publish its snapshot of second-quarter GDP on Friday. According to a Reuters survey of economists, GDP likely increased at a 1.8 per cent annualized rate in the April-June quarter, moderating from the first quarter's brisk 3.1 per cent pace.
June's surge in core capital goods orders suggests a pickup in business spending on equipment, but economists cautioned that the strength could be short-lived given an inventory glut in the motor vehicles industry and design problems at Boeing that are helping to undercut the manufacturing sector. The single-aisle plane was grounded worldwide in March after two fatal crashes in Ethiopia and Indonesia. Production of the aircraft has been reduced and deliveries suspended.
In a second report on Thursday, the Commerce Department said the goods trade deficit fell 1.2 per cent to US$74.2 billion in June, with imports dropping US$4.6 billion to US$210.5 billion. Imports fell broadly last month, potentially hinting at some cooling in domestic demand after gaining speed in recent months.