WRAPUP 1-U.S. core capital goods orders, shipments weak in April

WRAPUP 1-U.S. core capital goods orders, shipments weak in April

New orders for USA -made capital goods fell more than expected in April, further evidence that manufacturing and the broader economy were slowing after a growth spurt in the first quarter that was driven by exports and a buildup of inventories.

The Commerce Department reported that orders for non-defense capital goods excluding aircraft, dropped 0.9% last month as demand weakened nearly across the board.

Orders for durable goods-products created to last at least three years, such as cars and appliances-fell 2.1% from the prior month to a seasonally adjusted $248.4 billion in April, the Commerce Department said Friday. Expectations were for core capital goods orders to fall 0.3% in April.

Although a sales dip in April was expected due to the crisis at aviation giant Boeing - which was forced suspended deliveries of a top-selling jet after deadly crashes - orders for jets fell even faster than expected. Orders for transportation equipment dropped 5.9% after rising by 5.9% in March.

Durable goods orders serve as a useful leading indicator of future durable goods shipments, typically leading shipments in the economy by one to two months.

Economists polled by Reuters had forecast core capital goods orders falling 0.3% in April.

The downgrades suggest that growth is fading after growth clocked in at 3.2% in the first quarter. Boeing's move to cut production of its troubled 737 MAX aircraft is also hurting manufacturing. Second-quarter GDP growth estimates are below a 2% annualized rate. "Before the tariffs were increased a couple weeks ago, China's PMIs appeared to be recovering somewhat, pointing to better US numbers in due course", chipped in Pantheon Macroeconomics's Ian Shepherdson.

Big picture: The manufacturing side of the USA economy began to slacken toward the end of past year, a slowdown exacerbated by the trade war with China. This reverses the 1.7 percent increase in the previous month and marks the second large decline in the past three months. Orders for non-defense aircraft plunged 25.1% after rising 7.8% in March.

FILE PHOTO: Shipping containers sit at the ports of Los Angeles and Long Beach, California in this aerial photo taken February 6, 2015.

Shipments of manufactured durable goods in April, down three of the last four months, decreased $4.0 billion or 1.6% to $253.3 billion.

Durable goods inventories rose 0.4% last month, boosted by stocks of motor vehicle and aircraft. Factory production has increased just 0.9% in the past 12 months.

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