WASHINGTON: New orders for key U.S.-made capital goods dropped by the most in eight months in December and shipments were weak, suggesting business investment contracted further in the fourth quarter and remained a drag on economic growth.
Though tensions have eased with the signing this month of a"Phase 1" trade deal between Washington and Beijing, Boeing continues to loom over manufacturing. Boeing this month suspended production of its troubled 737 MAX jetliner, which was grounded last March following two fatal crashes. Core capital goods orders rose 0.8per cent in 2019. Shipments of core capital goods decreased 0.4per cent last month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. They declined by an unrevised 0.3per cent in November.
In a separate report on Tuesday, the Conference Board said its consumer confidence index increased 3.4 points to a reading of 131.6 in January, the highest reading since August. Economists expected a temporary drop in consumer confidence in February because of the deadly coronavirus, which has killed more than 100 people in China, with cases reported in some countries including the United States, France and Japan.
"The good news is that a drop in confidence is unlikely by itself to cause a significant drop in consumer spending," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. Economists estimate the production suspension could slice at least half a percentage point from first-quarter GDP growth. The hit to GDP growth would come from a smaller inventory build. Though airlines have continued to submit orders there have been no deliveries, leading to a rise in inventories at factories.
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