- New orders and shipments of key U.S.-made capital goods increased solidly in August amid strong demand for computers and electronic products.
- The data showed business spending on equipment is on track for another quarter of robust growth.
- Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, accelerated 1.8% after climbing 0.5% in July.
New orders and shipments of key U.S.-made capital goods increased solidly in August amid strong demand for computers and electronic products, keeping business spending on equipment on track for another quarter of robust growth.
The sustained strength in business investment is expected to limit the hit on economic growth from an anticipated slowdown in consumer spending as the boost from fiscal stimulus fades. Demand for goods is being driven by businesses desperate to replenish inventories, depleted in the first half of the year.
"The resilience of investment is one reason why we expect overall GDP growth will slow marginally in the third quarter, despite a bigger slump in consumption growth," said Michael Pearce, senior U.S. economist at Capital Economics in New York.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.5% last month, the Commerce Department said on Monday.
Data for July was revised higher to show these so-called core capital goods orders gaining 0.3% instead of the previously reported 0.1%. Economists polled by Reuters had forecast core capital goods orders increasing 0.4%.
Orders shot up 16.4% on a year-on-year basis.
Shipments of core capital goods advanced 0.7% last month after increasing 0.9% in July. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. Business spending on equipment has logged four straight quarters of double-digit growth.
Orders for computers and electronic products rose 1.4% last month. There were also increases in orders for electrical equipment, appliances and components, as well as fabricated metal products. But orders for machinery fell as did those for primary metals. An acute shortage of semiconductors and other inputs is undercutting production of some goods.
Raw materials shortages and a resurgence in Covid-19 cases, driven by the highly contagious Delta variant of the coronavirus prompted economists to slash their estimates for third-quarter GDP to as low as 3.5% annualized rate from as high as a 9% pace. The economy grew at a 6.6% pace in the second quarter.
With inventories extremely lean, core capital goods orders are likely to remain strong in the coming months and support manufacturing, which accounts for 11.9% of the economy.
Unfilled core capital goods orders rose 1.0% in August after a similar gain in July.
Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, accelerated 1.8% after climbing 0.5% in July. They were boosted by a 5.5% rebound in orders for transportation equipment, which followed a 0.4% fall in July.
Orders for civilian aircraft soared 77.9%. Boeing reported on its website that it had received 53 aircraft orders last month compared to 31 in July. Orders for motor vehicles and parts fell 3.1% after rising 5.3% in July.
Automakers have been adjusting their production schedules, to manage their chip supply. Unfilled orders of durable goods increased 1.0% last month after rising 0.5% in July.