By Lucia Mutikani
WASHINGTON, Apr 26 (Reuters) – New orders for key US-made capital goods grew solidly in March and shipments increased, solidifying expectations that economic expansion accelerated in the first quarter, fueled by growth. government aid and an improvement in public health.
The strength in business spending reported by the Commerce Department on Monday joined upbeat data on retail sales and the labor market to jump-start the economy into what analysts expect will be its best performance this year in nearly four decades. .
Economists anticipate that investment will be little impacted by Joe Biden’s proposal for a tax reform that calls for more taxes on the rich and big business to cover the costs of the White House’s economic agenda, including improving infrastructure. .
Details of the tax proposal could be released before Biden’s speech to Congress on Wednesday. Economists said there was no evidence that deep corporate tax cuts pushed by former President Donald Trump propped up business investment.
Non-defense capital goods orders excluding aircraft, a closely watched indicator of business spending plans, rose 0.9% last month. These underlying capital goods orders fell 0.8% in February after extremely cold temperatures hit much of the country.
Although March’s rise was below the 1.5% advance anticipated by economists in a Reuters poll, orders for underlying capital goods climbed 10.4% year-on-year last month.
Reports this month showed that retail sales hit a record in March, while the economy created the most jobs in seven months. Manufacturing activity measures are at multi-year highs, indicating continued strength in manufacturing, which represents 11.9% of the country’s economy.
In March, orders for underlying capital goods were driven by machinery, primary and manufactured metal products, as well as computers and electronics. But orders for electrical equipment, home appliances and components fell 1.5%.
“There is still a gap between orders and shipments as producers increase capacity and adjust to growing demand,” said Will Compernolle, an economist at FHN Financial. “The increase in the order book is especially bad in underlying capital goods, suggesting an acceleration in capex.”
Core capital goods shipments rebounded 1.3% after falling 1.1% in February. This measure is used to calculate equipment spending in the measurement of the government’s Gross Domestic Product.
Durable goods orders, items ranging from toasters to airplanes that must last three years or more, rose 0.5% in March after falling 0.9% in February. They were constrained by a 1.7% drop in orders for transportation equipment, which followed a 2.0% drop in February.
(Report by Lucia Mutikani, Edited in Spanish by Manuel Farías)