New orders for durable goods fell in November and capital goods placements were negative for the first time in three months dampening expectations that business spending will reemerge to help support economic growth in the fourth quarter.
Orders for manufactured goods designed to last more than three years dropped to flat in November following a 2.9 percent burst in October, reported the Commerce Department on Wednesday. Economists had predicted a 0.6 percent loss. Annual orders rose 2.5 percent following October's 1.1 percent decline. It was the first positive month since March.
Booking for capital goods excluding defense industries and civilian aircraft, a proxy for business investment and called 'capital good non-defense, ex aircraft and parts’ or Capex for short, decreased 0.4 percent in the month, double the -0.2 percent forecast. These orders lost more than half their prior October gains as revisions dropped the initial 1.3 percent gain to 0.6 percent. On the year Capex orders were off 0.9 percent, the eleventh monthly decline in row, a series not seen outside of recessions.
In a separate report from the Commerce Department, personal income rose 0.3 percent in November, ahead of the 0.2 percent forecast, though down from October’s 0.4 percent gain. The annual increase skidded to 4.4 percent, the lowest since April, from 4.5 percent in October.
Real personal spending, that is corrected for price changes, rose 0.3 percent last month as expected, but October’s 0.1 percent gain was revised away, ending flat. The twelve month gain fell to 2.5 percent from 2.7 percent in October. It was the smallest annual increase since May 2014 and the lowest this year.
The personal income and spending numbers and yesterday’s GDP revisions (2.1 percent to 2.0 percent) were cited by the Atlanta Federal Reserve as the reasons the bank's GDPNow forecast for the fourth quarter slipped to 1.3 percent from 1.9 percent.
"After yesterday's third-quarter GDP revision and this morning's personal income and outlays release, both from the U.S. Bureau of Economic Analysis, the now cast for fourth-quarter real consumer spending growth fell from 2.6 percent to 2.1 percent."
U.S. GDP expanded 2.17 percent in the first three quarters. If the Atlanta Fed’s forecast of 1.3 percent is correct, 2015’s growth rate would drop to 1.95 percent, the weakest since 2012.
American manufacturers have seen a decline in business this year as the combination of a stronger dollar and a slowing global economy have cut into export demand and brought the sector close to recession.
U.S. domestic consumption and auto sales have been resilient keeping overall economic growth positive but without increasing business investment and spending the economy is unlikely to expand faster than the 2.2 percent average of the past seven years.
Capex shipments, which are used in calculating gross domestic product, declined 0.5 percent last month and October's 0.5 percent tumble was doubled under revision to -1.0 percent.
These back to back declines in capital goods shipments in the first two month of the fourth quarter are a further indication that economic growth is going tobe less than the 2.0 percent rate of the prior quarter.
Commercial aircraft orders shrank in November after climbing in the prior month. Boeing Co. of Chicago said it received 89 new orders in November, the most since July and up from 59 in October.
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