U.S. factories posted flat orders of big-ticket goods in August, but underlying figures suggest businesses are boosting spending after long period of cutting.
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The Commerce Department said Wednesday orders for durable goods-products such as cars, tractors and refrigerators designed to last longer than three years-were unchanged from a month earlier. When excluding the volatile categories of defense and transportation products, sales declined.
Economists surveyed by The Wall Street Journal expected a 1.5% drop in overall orders.
The industry has been choppy of late: Orders had risen sharply in July after falling precipitously in June. Through eight months of 2016, orders are down 0.6% compared to the same period a year earlier.
But the report offered signs that companies are becoming confident enough to retool their facilities, a development that if sustained would lift the economy to stronger growth. Orders for capital goods excluding aircraft and defense-a rough measure of business investment-rose 0.6% in August from a month earlier. That category has risen for three consecutive months, though such spending remains 4% lower from a year earlier.
Weak business spending has been a major factor behind the economy's subpar growth in recent years, and it has presented a mystery to economists. Some of the weakness is tied to depressed energy prices, which have led to a decline in drilling and exploration, but other factors appear at play.
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The Federal Reserve pointed to "soft" business spending in its statement earlier this month after it held off on raising short-term interest rates. The Fed has kept rates exceptionally low since the recession to prod businesses and consumers to step up spending and boost economic growth. Consumers have boosted purchases broadly, contrasting with the subdued posture of companies.
"Investment spending really has been quite weak for some time, and we're really not certain exactly what is causing that," Fed Chairwoman Janet Yellen said in a media conference following the Sept. 21 Fed meeting. "Part of it, of course, has been the huge contraction in drilling activity associated with falling oil prices, but the weakness in investment spending extends beyond that sector. And I'm not certain of exactly what explains that."
Wednesday's report offered a mixed outlook for the manufacturing sector, which has also suffered amid a dicey global economy. The strong dollar, relative to other currencies, in recent years has driven up the price of American goods in foreign markets, hurting exports.
Orders outside of transportation fell 0.4% in August and have dropped for three of the past four months. Orders outside of defense fell 1% last month from July.
But the pickup in business investment suggests higher confidence and demand from companies in the U.S. Also, sales of cars and vehicle parts rose a healthy 0.7% last month, suggesting that consumer-driven sector remains robust.
Other reports suggest factories are taking a hit of late. The Institute for Supply Management, a trade group, said earlier this month that factory activity declined in August for the first time since February.
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