US capital goods orders fall, personal spending weakens following consumer optimism
American business continued to hold back on new investment in August and two measures of consumer spending pointed in different directions as the economy sought direction in the third quarter.
New orders for capital goods, a standard proxy for business spending, dropped last month though shipments, which enter the GDP calculation recovered modestly, according to US Census Bureau information.
Durable goods orders outside of the transportation sector unexpectedly rose in August and personal spending also gained though it was below forecast and a sharp decrease from July.
Placements for non-defense capital goods ex-aircraft fell 0.2% last month missing the prediction for a flat month and below the downwardly revised unchanged July result, initially issued at 0.4%. Shipments of these items increased 0.4%, after falling 0.6% in July.
Durable goods orders ex transport, in practice all US orders for goods designed to last three years or more without the civilian aircraft business of Boeing Company of Chicago, rose 0.5% in August, more than double the 0.2% prediction and reversing the 0.5% drop in July.
FXStreet
Personal spending edged 0.1% higher in August, under the 0.3% forecast and down from the revised 0.5% gain in July, originally 0.8%, reported the Bureau of Economic Analysis.
Business expenditures climbed 1.1% on the year but they have been weakening as firms hold back on investment concerned that the Trump administration’s almost two-year old trade war will lead to lower US and global economic growth. Purchasing manager’s indexes for the manufacturing and service sectors have fallen sharply from their 2018 highs.
Reuters
Consumption has been strong for the past six months supported by the vibrant labor market and rising wages. Retails sales had the best half year in 16 to August.
Reuters
Until August and September consumer sentiment had remained strong. However the Michigan Survey of Consumer Sentiment fell from 98.4 July to 89.8 I August and only recovered to 93.2 in September.
Reuters
The Conference Board Consumer Sentiment Survey dropped from 134.2 in August to 125.1 in September. Both surveys were near the bottom of their two year ranges in September.
One suggestion for the change in attitudes comes from the Michigan Survey and the difference between the current conditions and expectations scores.
Over the past six months the gauge that estimates consumers’ outlook for their situation in six months the expectations index, has slipped 11.1 points from 93.5 in May to 82.4 in September.
Over the same period the index of consumer’s satisfaction with their current economic state has declined less than half, just five points from 111.9 in June to 106.9 in September.
One data point is not an explanation but it a hint that the bitter political warfare in DC and the unsolved trade war with China and perhaps Brexit may be taking their toll on American optimism.
Author
Joseph Trevisani
FXStreet
Joseph Trevisani began his thirty-year career in the financial markets at Credit Suisse in New York and Singapore where he worked for 12 years as an interbank currency trader and trading desk manager.
