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WASHINGTON. — New orders for key US-made capital goods dropped by the most in eight months in December and shipments were weak, suggesting business investment contracted further in the fourth quarter and remained a drag on economic growth.
For now, however, the longest economic expansion on record looks set to continue, with other data on Tuesday showing consumer confidence surged to a five-month high in January amid optimism over the labour market.
That suggests consumer spending could stay fairly strong in the near term and blunt some of the hit on the economy from weak business investment.
Business spending has remained weak even as the Federal Reserve cut interest rate cuts three times last year.
Officials from the US central bank started a two-day policy meeting on Tuesday.
They are expected to reiterate the Fed’s desire to keep rates unchanged at least through this year.
Weak business investment and the resulting slump in manufacturing have been on the radar of Fed officials who have blamed trade tensions, especially the White House’s 18-month trade war with China, and an uncertain global economic growth outlook for the malaise.
Though tensions have eased with the signing this month of a “Phase 1” trade deal between Washington and Beijing, Boeing continues to loom over manufacturing. Boeing this month suspended production of its troubled 737 MAX jetliner, which was grounded last March following two fatal crashes.
“Manufacturing is clearly losing momentum as many of the most extreme tariffs on supply-chain inputs factories need to produce their final goods remain in place,” said Chris Rupkeychief economist at MUFG in New York. “When it comes to forecasting the economy in 2020, it’s the consumer stupid.” — Reuters.
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