U.S. business spending slowing, housing market weak

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New orders for key U.S.-made capital goods were unchanged in October and shipments rebounded modestly, which could temper expectations of an acceleration in business spending on equipment early in the fourth quarter.

While other data on Wednesday showed home resales rising last month after six straight monthly declines, house purchases remained sharply down this year. Sluggish business spending on equipment together with a lackluster housing market could stoke fears that higher interest rates are hurting the economy.

There was also disappointing news on the labor market. The number of Americans filing applications for unemployment benefits rose to more than a four-month high last week.

"The economy may have seen its best day already for growth and prosperity back a couple of months ago in late summer," said Chris Rupkey, chief economist at MUFG. "Winter is coming for the economic outlook where business investment spending looks to be topping out, and companies have let a few workers go."

US job fair. /VCG Photo

The Commerce Department said the flat reading in orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, followed a downwardly revised 0.5 percent drop in September.

These so-called core capital goods orders were previously reported to have dipped 0.1 percent in September.

Last month, there were declines in orders for primary metals and machinery. That offset increases in orders for fabricated metal products, computers and electronic products, as well as electrical equipment, appliances and components.

Economists had forecast core capital goods orders rising 0.2 percent last month. Core capital goods orders increased 6.4 percent on a year-on-year basis.

A house is for sale. /VCG Photo

Shipments of core capital goods rose 0.3 percent in October after a downwardly revised 0.2 percent drop 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 percent in September. Business spending on equipment stalled in the third quarter and is faltering despite the Trump administration's 1.5 trillion-US-dollar tax cut.

Some companies including Apple Inc. used their tax windfall to buy back shares on a massive scale. Spending on equipment could also be undercut by declining oil prices. Brent crude has dropped about 28 percent since early October amid rising concerns about slowing global growth.

In a separate report on Wednesday, the National Association of Realtors said existing home sales rose 1.4 percent to a seasonally adjusted annual rate of 5.22 million units last month. Sales, however, were 5.1 percent lower than in October 2017, the sharpest 12-month drop since July 2014.

The report came on the heels of data on Tuesday showing a second straight monthly decline in single-family homebuilding in October.

Source(s): Reuters