WASHINGTON (Reuters) – New orders for key U.S.-manufactured capital goods fell more than expected in March, while shipments declined, suggesting that business spending on equipment was likely a drag on economic growth in the first quarter.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4% last month, the Commerce Department said on Wednesday.
Data for February was revised down to show these so-called core capital goods orders falling 0.7% instead of dipping 0.1% as previously reported. Economists polled by Reuters had forecast core capital goods orders slipping 0.1%.
A tightening in credit following recent financial market turmoil could make funding less accessible to households and businesses, putting pressure on investment in equipment and by extension the manufacturing industry.
Manufacturing, which accounts for 11.3% of the U.S. economy, is reeling from the Federal Reserve’s fastest interest rate hiking campaign since the 1980s. Spending is also shifting away from goods to services, while sluggish global demand is crimping exports. The inventory cycle is also turning, with restocking by businesses slowing to match cooling demand.
Shipments of core capital goods decreased 0.4% in March after falling 0.4% in February. Core capital goods shipments are used to calculate equipment spending in the gross domestic product measurement. Business spending on equipment fell by the most in 2-1/2 years in the fourth quarter.
Most economists expect a small decline when the government publishes its advance estimate of GDP for the first quarter on Thursday. According to a Reuters survey of economists, GDP likely increased at a 2.0% annualized rate in the January-March quarter. The economy grew at a 2.6% pace in the fourth quarter.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
