US durable goods orders fall 4.4 percent in October

Published 8:19 am Friday, November 23, 2018

WASHINGTON — Orders to U.S. factories for big-ticket manufactured goods fell by the largest amount in 15 months with a key category that tracks business investment showing weakness for the third consecutive month.

The Commerce Department said Wednesday that orders for durable goods dropped 4.4 percent last month. The October drop led by a huge decline in the volatile areas of commercial and military aircraft.

A category that serves as a proxy for business investment was flat in October after declines in both August and September. The slowdown has raised the specter that a widening trade war between the United States and China is causing U.S. companies to grow more cautious about committing resources to expand and modernize their operations.

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Ben Herzon, executive director of US Economics Macroeconomic Advisers, said the number of risks to manufacturing was growing amid a stronger dollar, which makes American goods less competitive on global markets to worries about the U.S.-China trade battle.

“While the manufacturing sector is currently in good shape, headwinds are mounting,” Herzon said. “We expect strong momentum in the economy to overcome these headwinds and keep manufacturing on a firming trend, but we are watching developments closely for signs that this calculus could change.”

The overall economy, as measured by the gross domestic product, grew at a strong 3.5 percent annual rate in the July-September quarter but this gain came despite the fact that business investment spending slowed sharply in the third quarter, to an annual rate of just 0.8 percent, the weakest showing in nearly two years, after an 8.7 percent surge in the second quarter.

In addition to the possible adverse effects from the U.S.-China trade war, economists said the investment slowdown could be an indication that the boost to investment spending stemming from the tax cut President Donald Trump pushed through Congress last year is beginning to wane.

The report on durable goods, items expected to last at least three years, showed that Octobers drop was the biggest setback since a 7.4 percent fall in July 2017.