Corporate investment affected by uncertainty, U.S. durable goods orders fell in July

According to the Zhitong Finance and Economics APP, data released by the US Department of Commerce on Monday showed that excluding aircraft, non-defense capital goods orders in the US fell by 0.1% month-on-month in July, while the revised growth rate for June was 0.5%. Durable goods orders in July increased by 9.9% month-on-month. Orders for durable goods excluding transportation equipment decreased by 0.2%.

The report indicated that orders for primary metals, computers, communication equipment, and electrical equipment declined. Orders for motor vehicles and parts also saw a decrease.

While many businesses are still committed to long-term investments, uncertainty surrounding the presidential election and future demand has led to companies scaling back expansion plans. This suggests that factory production may struggle to gain momentum in the coming months.

Meanwhile, the Federal Reserve's rate cuts and prospects of boosting demand could encourage businesses to engage in new investments.

Shipments of core capital goods (used to help calculate equipment investment in the government's Gross Domestic Product report) fell by 0.4% in early third quarter. Prior to the report's release, the Atlanta Fed's GDPNow forecast indicated a slight increase in business equipment spending from July to September.

The Department of Commerce's report revealed that commercial aircraft orders fluctuate significantly on a monthly basis, but have rebounded significantly after experiencing the largest decline since mid-2020.

Boeing reported that orders in July were 72 aircraft, higher than the 14 in June. Following one of the most turbulent periods in the company's history, the company's commercial aircraft deliveries show signs of stabilization.

Although comparing the two is often helpful, aircraft orders are volatile, and government data does not always correlate with monthly data from aircraft manufacturers.

Military capital goods orders in July increased by 1.2%, while total durable goods orders excluding defense increased by 10.4%.

Economist Eliza Winger stated, "Various factors including the November election have led to persistent uncertainty in economic growth and consumer demand, potentially causing businesses to delay investments."

Recent surveys of purchasing managers indicate that the US manufacturing sector is struggling. The manufacturing index released earlier this month by the Institute for Supply Management showed that factory activity in July contracted at the fastest rate in eight months, while the August PMI flash estimate from IHS Markit contracted at the fastest pace this year