New orders for U.S.-made capital goods increased by the most in eight months in March, but a drop in shipments suggested business spending on equipment slowed down in the first quarter.
The Commerce Department said on Thursday orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.3%, powered by a jump in demand for computers and electronic products.
That was the largest increase since last July. Data for February was revised slightly up to show these so-called core capital goods orders edging up 0.1% instead of dipping 0.1% as previously reported.
Economists polled by Reuters had forecast core capital goods orders nudging up 0.1% in March. Core capital goods orders increased 2.8% on a year-on-year basis.
Shipments of core capital goods slipped 0.2% in March after an upwardly revised 0.2% gain in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.
They were previously reported to have slipped 0.1% in February. Business spending on equipment is expected to have slowed in the first quarter because of the delayed impact of sharp drops in oil prices toward the end of 2018 and fading depreciation provisions in the 2018 tax bill.
March’s surge in core capital goods orders, however, suggests a pickup in business spending in the months ahead.
It also implies some stabilization in manufacturing activity, which has been squeezed by the ebbing stimulus from a $1.5 trillion tax cut package and supply chain disruptions caused by Washington’s trade war with China.
In March, orders for machinery rose 0.3% after declining 0.7% in February. Orders for computers and electronic products soared 2.2%. There were also increases in orders for electrical equipment, appliances and components. But orders for primary metals fell, as did those for fabricated metal products.
Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, shot up 2.7% in March after declining 1.1% in the prior month. Orders for transportation equipment rebounded 7.0% after falling 2.9% in February.
Orders for motor vehicles and parts rose 2.1% in March. Orders for non-defense aircraft jumped 31.2% after plunging 25.4% in February.
Boeing reported on its website that it received 44 aircraft orders, up from only five in February. There were no orders booked for its troubled 737 Max aircraft. Boeing’s fastest-selling 737 Max jet was grounded in March after two fatal plane crashes in five months.