Chart of the week
Nondefense capital goods orders excluding aircraft rose 1.2% in October. This takes them back to their July level and close to current cycle highs, following two straight falls in August and September.
Our analysis
Amid uncertainty driven by the US–Chinese trade talks and a manufacturing sector slowdown, US businesses have scaled back their investment spending since the summer, as shown by the third-quarter GDP numbers. Nonresidential investment fell 2.7% on an annualised basis, penalised by falling investment in structures and equipment. Only investment in intellectual property rights (software, patents and content creation, in particular), which by nature is less cyclical, continued to progress.
Some analysts are concerned that the quarters ahead could see investment continuing to fall and taking the rest of the economy along with it. The relative stability of nondefense capital goods orders excluding aircraft is a reassuring sign.
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The opinion expressed above is dated 28 November 2019, and liable to change.
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