Overview
New orders for key U.S.-manufactured capital equipment climbed in June, and shipments of those goods surged, according to data from the Commerce Department’s Census Bureau released on Monday. The measure that strips out defense and aircraft - a widely watched proxy for business investment - rose 0.9% last month.
Details on orders and revisions
The 0.9% increase in non-defense capital goods orders excluding aircraft follows a revised 1.9% gain in May. That May figure was revised upward from an initially reported 1.4% advance. Economists polled by Reuters had expected core capital goods orders to rise 0.8% in June, compared with the previously reported 1.4% May increase.
Shipments and GDP linkage
Shipments of core capital goods jumped 1.9% in June after a 0.2% rise in May. Shipments of these items are used in the federal government’s calculation of the equipment component of gross domestic product, making the movement in shipments relevant to upcoming GDP estimates.
Context for GDP reporting
The government is scheduled to publish its advance estimate of second-quarter GDP growth on Thursday. A Reuters survey of economists included in the reports estimated second-quarter economic growth of 2.1% at an annualized rate, the same pace reported for the January-March quarter.
What the data represent
Core non-defense capital goods orders excluding aircraft are treated as a near-term gauge of business spending on equipment. Shipments data feed directly into the GDP calculations and may therefore influence the advance reading when it is released.
Data note: All figures and timing referenced are taken from the Census Bureau release and the Reuters survey as described above.