Piles of equipment await sale at Pyramid Mountain Lumber in Seeley Lake. (Photo by Matt McClain/The Washington Post)
Orders placed with US factories for business equipment unexpectedly declined in February, suggesting some companies are limiting investment as they await specifics on tariffs and tax policy.
The value of core capital goods orders, a proxy for investment in equipment excluding aircraft and military hardware, decreased 0.3% last month, the first drop since October, Commerce Department figures showed Wednesday. The data aren’t adjusted for inflation.
Rather than orders that can be canceled, the government uses data on shipments a direct input to gross domestic product, which is when a payment has been made. Core capital goods shipments rose 0.9%, the most in a year and a possible sign companies were racing to get ahead of tariffs.
Before the report, the Federal Reserve Bank of Atlanta’s GDPNow forecast penciled in a healthy increase in business equipment spending for the first quarter.
"With underlying capital goods shipments also doing well, machinery and equipment investment is on track to rebound this quarter, albeit not by enough to prevent a sharp slowdown in overall GDP growth,” Stephen Brown, deputy chief North America economist at Capital Economics, said in a note.
Though many businesses are still committed to making long-term investments, they face uncertainty about President Donald Trump’s vacillating tariffs and questions about tax-cut legislation that has caused consumer confidence to plummet and led to a stock-market rout.
Bookings for all durable goods - items meant to last at least three years - rose 0.9%. Excluding transportation equipment, orders increased 0.7%.
The Commerce Department’s durable goods report showed commercial aircraft bookings, which are volatile from month to month, dropped 5% after nearly doubling in January.
Boeing Co. reported 13 orders in February, down from 36 a month earlier.
While often helpful to compare the two, aircraft orders are volatile and the government data don’t always correlate with the planemaker’s monthly figures.
Recent purchasing managers surveys illustrate a manufacturing sector struggling for momentum amid the economic uncertainty and a rise in materials prices. The S&P Global manufacturing index slipped back into contraction territory this month.
