WASHINGTON: New orders for key US-made capital goods fell sharply in February as demand for machinery and other products slumped, suggesting a deepening contraction in business investment that analysts said signaled the economy was already in recession.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.8 per cent in February after rising by a slightly downwardly revised 1.0 per cent in January, the Commerce Department said on Wednesday . Business investment has contracted for three straight quarters, the longest such stretch since 2009. Economists have blamed the business investment rot on the Trump administration's 20-month-old trade war with China. The weakness in business investment comes at a time when corporate profits are weakening.
"Non-essential" businesses have also been ordered closed, leading to massive unemployment and a rush to apply for jobless benefits. A survey by data firm IHS Markit on Tuesday showed its gauge of US business activity dropped to a record low in March. Some analysts say the economy slipped into recession in March.
Business investment is taking a hit from a collapse in crude prices, thanks to the coronavirus and an oil price war between Russia and Saudi Arabia. A survey from the Dallas Fed on Wednesday showed a significant decline in activity in the oil and gas sector in the first quarter. "We now believe the additional headwind posed by the coronavirus will lead to one of the largest pullbacks in capital spending in history."
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