U.S. companies ordered less commercial equipment last month, according to the latest government data.
Figures released by the Commerce Department on Monday (August 26) showed that the value of core capital goods, usually seen as a proxy for spending on military equipment and equipment excluding aircraft, fell 0.1% in July, following a revised 0.5% increase in the previous month.
Orders for durable goods rose 9.9%, but fell 0.2% excluding transportation equipment. Orders for computer, communications and electrical equipment, automobiles and auto parts fell, the data showed.
“A variety of factors increasing uncertainty about the sustainability of economic growth and consumer demand, including the November election, are likely causing companies to postpone investment,” said Eliza Winger of Bloomberg Economics.
That means factories may struggle to regain momentum in the coming months, the Bloomberg report said. At the same time, the idea of the Federal Reserve cutting interest rates to help bolster demand could encourage companies to move forward with new investments, the report added.
Meanwhile, a recent survey by the Federal Reserve Bank of Atlanta found that businesses’ one-year-out inflation expectations were “broadly unchanged” in August and remained slightly above pre-pandemic levels.
According to the Federal Reserve’s August Business Inflation Expectations (BIE) survey, businesses, on average, expect inflation to grow at 2.2%, down slightly from the 2.4% recorded in the July survey.
“One-year-ahead unit cost expectations have declined significantly since reaching a peak of 3.8% in April 2022 but are still somewhat higher than the pre-pandemic average of 2.0% (January 2017 to December 2019),” the Fed said in a research note.
A separate survey by the Cleveland Fed found that corporate executives have become more optimistic about the direction of inflation, with executives saying in July they expect inflation over the next 12 months to fall to 3.4% from 3.8% in April.
“The Cleveland Fed releases these survey data because business leaders’ inflation expectations affect the prices they charge their customers, which in turn can affect the path of inflation,” the Fed said in a news release.
A separate, more recent survey showed that U.S. consumers’ inflation expectations one year ahead also remained unchanged at 2.9%.
Preliminary August results from the University of Michigan Survey of Consumers showed that consumers’ inflation expectations one year ahead were unchanged from the previous month and remain within the 2.3% to 3% range recorded in the two years prior to the pandemic.
