Orders for basic capital goods in the United States decrease; the merchandise trade deficit is widening

WASHINGTON (Reuters) – In August, after four consecutive months of strong growth, new orders were registered for key capital goods in the United States, while shipments made little progress.

Other data released Thursday shows that the goods trade deficit widened considerably last month as a result of lower exports and rising imports. But wholesale and retail stocks have risen sharply, which should help offset some of the expected contraction of trade on economic growth in the third quarter.

The Commerce Department said off-aircraft non-defense capital goods orders, a highly monitored indicator of corporate spending plans, had dropped 0.5% last month.

So-called basic equipment orders rose 1.5% in July. Economists polled by Reuters had forecast orders for these products up 0.4% last month. Orders for basic capital goods increased 7.4% year-over-year.

Shipments of basic capital goods advanced 0.1% last month after jumping 1.1% in July. Deliveries of capital equipment are used to calculate capital expenditures to the extent of government gross domestic product.

With business confidence at multi-year highs, supported in part by a $ 1.5 trillion cut, August's surprise drop in orders for capital goods should be temporary. There are fears, however, that a growing trade war between the US and China could undermine confidence and undermine consumer and business spending.

Washington imposed tariffs on Chinese goods worth $ 200 billion on Monday, and Beijing imposed tariffs on US $ 60 billion worth of goods. The United States and China had already imposed tariffs of $ 50 billion on their respective products.

Although manufacturers have raised tariff concerns that contribute to bottlenecks in the supply chain, there is so far no indication that trade tensions are having a significant impact on the economy.

The Federal Reserve raised interest rates Wednesday for the third time this year. President Jerome Powell told reporters that it was "a particularly brilliant moment" for the economy.

The dollar was trading against a basket of currencies while US Treasury yields have changed little.

DECLINE EXPORTS

The Commerce Department confirmed Thursday in a second report that the economy had grown at an annualized rate of 4.2% in the second quarter. It was the fastest in almost four years and almost double the 2.2% pace set in the first quarter.

Growth forecasts for the July-September quarter are above 3%. A third report by the Commerce Department showed that the goods trade deficit increased by $ 3.8 billion to $ 75.8 billion in August.

Exports of goods fell 1.6% to settle at $ 137.9 billion, under the weight of a 9.5% drop in food, food, and food shipments for animals and drinks. Last month, exports of industrial supplies and motor vehicles also declined.

Imports of goods rose 0.7 per cent to $ 213.7 billion in August, driven by motor vehicles, consumer goods and other goods.

The expected slowdown in the trade deficit could be partially offset by an increase in investments in stocks. Wholesalers' inventories jumped 0.8% in August and retail inventories rose 0.7%.

Other data released Thursday by the Labor Department showed that the number of Americans applying for unemployment benefits had risen more than expected last week, likely due to the temporary relocation of Hurricane Florence. The underlying trend, however, continued to point to a tightening of the labor market.

Initial claims for state unemployment benefits increased by 12,000 to 214,000 for the week ended September 22. Applications dropped to 202,000 during the week ended September 15th.

Economists polled by Reuters had forecast claims rising to 210,000 over the past week. Hurricane Florence struck parts of the south last week, causing floods and sending people into emergency shelters.

The Labor Department reported an increase in unadjusted claims for South Carolina and North Carolina last week. The four-week moving average of initial claims, seen as a better measure of labor market trends, as it generates weekly volatility, only increased from 250 to 206,250 last week.

The labor market is considered close or to full employment. It continues to strengthen, with non-farm payrolls increasing by 201,000 in August and annual wage growth recording its strongest growth in over nine years. Job openings peaked at 6.9 million in July.