US core capital goods orders drop in Feb amid uncertainty over tariffs

New orders for key US-manufactured capital goods unexpectedly fell in February and could remain sluggish as economic uncertainty rises because of tariffs, discouraging businesses from boosting spending on equipment. 

Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.3 per cent last month after an upwardly revised 0.9 per cent surge in January, the Commerce Department's Census Bureau said on Wednesday. 

Economists polled by Reuters had forecast these so-called core capital goods orders gaining 0.2 per cent after a previously reported 0.8 per cent jump in January. Businesses eager to avoid higher prices because of tariffs likely front-loaded orders in January. 

President Donald Trump has announced a raft of levies on imports. Some of the duties have been delayed until April. 

Economists have warned that the nature in which the tariffs are being handled was not supportive of economic activity. 

Business sentiment and consumer confidence have deteriorated in recent months. 

Trump on Monday indicated that not all of his threatened duties would be imposed on April 2 and some countries may get breaks, but at the same time said tariffs on imported automobiles were coming soon. 

Shipments of core capital goods rebounded 0.9 per cent after falling 0.2 per cent in January. Non-defence capital goods orders declined 1.5 per cent after accelerating 12.8 per cent in January. Shipments of these goods rose 0.5 per cent after vaulting 3.2 per cent in the prior month. 

Core and non-defence capital goods shipments go into the calculation of the business spending on equipment component in the gross domestic product report. 

Business investment in equipment contracted in the fourth quarter, partially offsetting robust consumer spending. 

Growth estimates for the January-March quarter are mostly below a 1.5 per cent annualized rate and the odds of a contraction are high. The economy grew at a 2.3 per cent pace in the fourth quarter.     

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