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U.S. core capital goods orders rise modestly in November

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Stacked containers are shown as ships unload their cargo at the Port of Los Angeles in Los Angeles, California, U.S. November 22, 2021. REUTERS/Mike Blake

New orders for U.S.-made capital goods rose moderately in November while shipments fell, pointing to a slowdown in business spending on equipment this quarter as higher borrowing costs cool demand for goods.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.2% last month, the Commerce Department said on Friday. These so-called core capital goods orders increased 0.3% in October.

Economists polled by Reuters had forecast that core capital goods orders would be unchanged. Core capital goods increased 8.8% on a year-on-year basis in November.

The data is not adjusted for inflation. Slowing price increases, a strong dollar and a shift in spending from goods to services likely contributed to the moderation in core capital goods orders. That is hurting manufacturing, which accounts for 11.3% of the economy.

There were increases in orders for machinery, computers and electronic products as well as electrical equipment, appliances and components. But primary metals orders slipped.

Shipments of core capital goods dipped 0.1% after increasing 1.4% in October. Core capital goods shipments are used to calculate equipment spending in the gross domestic product measurement.

Business spending on equipment contributed to the economy’s 3.2% annualized growth pace in the third quarter. The Federal Reserve last week hiked its policy rate by 50 basis points to a range of 4.25%-4.50%, the highest since late 2007. U.S. central bank officials expect the rate to rise to between 5.00% and 5.25% next year, a level that could be sustained for a while.

Orders for items ranging from toasters to aircraft that are meant to last three years or more dropped 2.1% in November after rising 0.7% in October.

They were weighed down by a 6.3% decrease in orders for transportation equipment, which followed a 1.9% increase in October. Motor vehicle orders slipped 0.1%. Orders for the volatile civilian aircraft category plunged 36.4%.