WASHINGTON: A gauge of US business investment plans rebounded solidly in June, suggesting the drag on manufacturing from capital spending cuts was starting to ebb.
The slightly upbeat report bolsters the economic growth outlook and supports views the Federal Reserve will raise interest rates later this year.
The Fed’s policy-setting committee meets on Tuesday and on Wednesday.
The Commerce Department said on Monday non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.9 per cent last month after an unrevised 0.4 per cent drop in May. The increase followed two straight months of declines. Economists had expected these so-called core capital goods to increase 0.4 per cent in June.
US financial markets were little moved by the report as a plunge in Chinese stocks overnight sparked concerns about the global economy. Prices for US government debt rose, while US stock index futures were trading lower.
Deep investment spending cuts in the energy sector in the aftermath of a more than 60 per cent plunge in crude oil prices last year have weighed on factory activity. But there are signs that the energy spending rout is close to an end.
Data on Friday showed US energy firms added 21 oil rigs last week, marking the third increase over the past 33 weeks and bringing the total rig count to its highest since late May.
Schlumberger, the world’s No. 1 oilfield services provider said last week it believed the North American rig count may be bottoming and that a slow rise in both land drilling and completion activity could occur in the second half of the year.
Schlumberger and rival Halliburton have slashed their capital expenditure budgets for this year.
Manufacturing has also been hammered by a strong dollar and slow global demand, which have squeezed profits of multinational corporations such as Whirlpool Corp and Caterpillar.
The dollar has gained 14.6 per cent against the currencies of the United States’ main trading partners since June 2014, taking a bite out of the profits of multinational corporations.
Factories also have been hampered by businesses placing fewer orders while working through a stockpile of goods accumulated last year.
Shipments of core capital goods, which are used to calculate equipment spending in the government’s gross domestic product measurement, slipped 0.1 per cent in June after a 0.3 per cent fall in May.
That suggests business spending was probably a drag on second-quarter GDP. The government will release its second-quarter GDP snapshot on Thursday.
An 8.9 per cent jump in transportation equipment boosted overall orders for durable goods — items ranging from toasters to aircraft that are meant to last three years or more — which increased 3.4 per cent last month.
Transportation was buoyed by a 66.1 per cent surge in aircraft orders, which reversed May’s 31.6 percent plunge.
Boeing reported on its website that it had received 161 orders last month, up from only 11 in May.
Orders for automobiles and parts edged up 0.2 per cent after slipping 0.3 per cent the prior month.
