Orders for Capital Goods Remain Weak: U.S. Economic Takeaways

Rosenberg: Economic Data Raises Odds for Fed Action
  • Equipment bookings fall for third month, durables data show
  • Jobless claims retreat, while home-purchase contracts jump

What you need to know about Thursday’s U.S. economic data:

DURABLE-GOODS ORDERS (APRIL)

  • Climbed 3.4 percent (forecast was 0.5 percent) after 1.9 percent advance on heels of a surge in commercial aircraft bookings
  • Orders for non-defense capital goods excluding aircraft, a proxy for business investment, unexpectedly fell 0.8 percent to five-year low of $62.4 billion
  • Shipments of such equipment increased 0.3 percent, erasing March drop

The Takeaway: There’s no relief in sight for American makers of business equipment, who continue to pull back amid weak global growth, retrenchment in the energy sector and an ongoing reduction in inventories. Orders for capital equipment excluding military hardware and aircraft fell for a third straight month, and shipments of such goods, used to calculate gross domestic product, have dropped an annualized 10.6 percent from February through April. That’s raising doubts about how soon factories will be able to pull out of a slump and stop being a drag on economic growth. After the report, economists at Barclays Plc lowered their second-quarter GDP tracking estimate to 2.5 percent from 2.6 percent, while Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC, shaved his tracking forecast by two-tenths of a percentage point to 2.6 percent.

JOBLESS CLAIMS (WEEK ENDED MAY 21)

  • Fell by 10,000 to 268,000 (forecast was 275,000)
  • Four-week moving average, a less volatile measure, rose to 278,500 from 275,750
  • Number of Americans on unemployment benefit rolls climbed to 2.16 million from 2.15 million

The Takeaway: Applications for jobless benefits are receding after jumping to a more than one-year high of 294,000 in the first week of May. The latest declines show the surge was due to transitory events such as the spring break holiday at schools in New York and auto plant shutdowns in Michigan. Claims are hovering below the 300,000 mark that economists consider consistent with a healthy labor market, and indicate employers are retaining workers amid prospects that demand will firm in coming months.

PENDING HOME SALES (APRIL)

  • Rose 5.1 percent (forecast was 0.7 percent), the most since October 2010
  • Index of signed contracts for existing-home sales purchases climbed to 116.3, the highest in more than a decade
  • Pending sales increased 2.9 percent (unadjusted) from April 2015
  • Three of four regions posted gains, including an 11.4 percent surge in the West that was the biggest in records back to 2001

The Takeaway: The housing industry, at least, is roaring back after the U.S. economy’s sluggish start to the year. In the last round of major residential real-estate data for the month, purchase contracts for previously owned homes surged to the strongest level since February 2006, helped by the boom in the West and the biggest jump in the South in six years. While limited inventory could be a significant roadblock to further progress, home buyers also might be moving off the fence before interest rates rise.

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