New orders for United States manufactured capital goods increased less than what was projected for the month of June because of a weak demand for machinery as well as various other goods, indicated a prolonged downturn in business spending. Business investment is still soft regardless of data ranging from retail sales to housing showing that the economy has regained speed after growth almost stopped earlier during 2016. The Commerce Department stated on Wednesday that non-defense capital goods orders excluding aircraft jumped by 0.2 percent in June after dropping 0.5 percent during May.
“It suggests that the disappointing performance in business investment activity goes beyond the slackening in capital goods demand in the energy sector, and it underscores the continued sluggishness in this segment of the U.S. economy,” Millan Mulraine, deputy chief economist at TD Securities in New York, said.
Federal Reserve officials have marked feeble business spending as the center of concern and weakness which could be one of the factors that could encourage the United States central bank to keep interest rates at the same rate at the end of a two-day meeting later on Wednesday. Economists predicted that there would be an increase of 0.3 percent in capital core goods. Prices for United States government bonds increase on the data, as the dollar did not change much against a basket of currencies. Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last at least three years, decreased 4.0 percent in June, the largest drop since August 2014, after dropping 2.8 percent during May.
Business spending has dropped since the end of 2015. This is due to lower oil prices that cut into profits, forcing companies to decrease their budgets. In addition, ambiguity over both global demand as well as the upcoming presidential election has also made companies worried about spending, according to economists.