DEBT FINANCING. U.S. August durable goods orders slip

U.S. companies’ orders of durable goods fell less than expected in August, slipping 0.1 per cent from the previous month.
Economists saw the data as mainly positive because firms ordered more machinery, computers and communication equipment, which suggested they are sticking with their investment plans, despite slow growth and weak consumer spending.
The overall figure fell largely due to an 8.5 per cent drop in orders for autos and auto parts, which in July surged by 10.2 per cent, their biggest gain in eight years.
Economists looked past that so-called headline figure and focused more closely on a 1.1 per cent increase in a key category that measures business investment plans.
That category includes core capital goods that are neither used for defense nor transportation.
As well, shipments of those goods rose 2.8 per cent, the fourth consecutive gain in this category.
The government looks closely at shipment data when calculating economic growth.
The orders were placed and shipped in a month when world stock markets fluctuated wildly, Europe's debt crisis intensified and a raft of data suggested the U.S. economy was weakening.
“Against this backdrop, it was widely expected U.S. durable goods orders would decline,” Martin Schwerdtfeger, senior economist at TD Bank, said in a commentary.
“Therefore, today’s virtually flat showing of total orders, combined with the increase in core capital goods could be regarded as a positive sign that economic growth has continued during the third quarter.”
Still, Schwerdtfeger warned an increase in orders for longer-lasting factory goods aren’t likely to pick up much momentum, given divisions in Congress over how to get U.S. government debt under control and the escalation in Europe’s debt crisis.
These issues “will keep firms sitting on their investment plans and households delaying durable goods purchases,” he predicted.
Durable goods are products expected to last at least three years, and are widely watched as a measure of consumers’ confidence and their willingness to commit to big-ticket spending.
With files from The Associated Press Accessibility Links

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