Orders placed with U.S. factories for business equipment unexpectedly declined in August, the first drop in five months, marking a pause from solid gains in manufacturing, Commerce Department figures showed Thursday.
Non-military capital goods orders excluding aircraft fell 0.5% month over month (estimates were for a 0.4% rise) after climbing 1.5% the prior month; the figure is a proxy for business investment. Shipments of those goods, used to calculate gross domestic product, rose 0.1% (estimates were for a 0.5% increase) after a 1.1% advance. Broader measure of bookings for all durable goods, or items meant to last at least three years, jumped 4.5% (estimates were for a 2% gain), most since February, following 1.2% decrease; reflecting large rebounds in aircraft orders, military bookings.
While the monthly data on business-equipment orders are typically volatile, and August's dip follows a strong July, analysts are watching for signs that a widening trade war is spurring companies to slow investment. Corporations have cited risks from higher prices for steel and aluminum, with Ford Motor Co. saying that metals tariffs reduced its profits by $1 billion. General Motors Corp. has also cited higher metals costs as dimming its outlook.
A more persistent slowdown in business spending would weigh on what's expected to be a solid second half for the economy, after corporate investment, boosted by tax cuts, supported expansion earlier this year. The Commerce Department's third and final gross domestic product estimate for the second quarter showed an unrevised annualized pace of 4.2% growth, the fastest since 2014, according to a separate report on Thursday.
The broader jump in durable-goods orders in August reflects bookings for civilian aircraft and parts, also a volatile category, which surged 69.1% after a 29.1% drop in July. Boeing Co. previously reported that the planemaker received 99 orders in August, up from 25 in July.
Excluding transportation items, durable-goods orders rose 0.1%, less than forecasts for 0.4%, after a revised 0.2% gain.
Orders for primary metals rose 0.9%, fabricated metal products were unchanged, machinery was up 0.1%.
Bookings for motor vehicles and parts fell 1%; communications equipment was up 0.7%, computers and related products were down 0.8%.
Defense capital-goods orders jumped 44.4%, the most since February. Durable goods inventories fell 0.4%, the biggest drop since June 2016.
