New orders for United States manufactured capital goods increased for the second consecutive month during July as demand for machinery and a variety of other products saw more action, signaling that a business spending slowdown may be coming to an end. The economic outlook also was increased by another report on Thursday showing a surprising decrease in the amount of Americans filing for unemployment benefits last week, showing sustained labor market strength. In summation, the data suggested the Federal Reserve will raise interest rates in December. Fed Chair Janet Yellen might give some hints on what the central bank may decide to do when she speaks on Friday at a worldwide central bankers’ conference in Jackson Hole, Wyoming.
“This kind of data are consistent with what the Fed is looking for in terms of the labor market and economic growth. If we get more data like this, that will suggest we are likely to see an interest rate increase, most likely in December,” Gus Faucher, senior economist at PNC Financial Services Group, said.
The Commerce Department stated that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped by 1.6 percent during the month of July, the largest increase since January. These so-called core capital goods orders jumped by 0.5 percent in June. The increase last month marked the first consecutive increase since January of 2015. Economists polled had predicted core capital goods orders jumping by merely 0.3 percent last month.
There were hefty jumps in orders for machinery, primary metals, fabricated metal products, computers and electronic products, as well as electrical equipment, appliances, and components. U.S. financial markets were barely moved by the data as investors were focusing on Yellen’s upcoming speech. The dollar .DXY was trading marginally lower against a basket of currencies, while U.S. stocks did not change much. Prices for U.S. government bonds fell just a bit.