[10/27/15] A gauge of United States business investment plans fell for a second straight month in September, pointing to a sharp slowdown in economic growth and casting more doubt on whether the Federal Reserve will raise interest rates this year.
Other data on Tuesday showed that consumer confidence slipped in October in the face of worries over a recent moderation in job growth and its potential impact on income. Housing, however, remained the bright spot, and home prices accelerated in August. That should improve household wealth, which has been buffeted by a strong dollar, weak global demand, spending cuts in the energy sector and efforts by businesses to reduce an inventory glut.
The continued weakness in business spending, together with the slowdown in hiring, could make it difficult for the Fed to lift its short-term interest rate from near zero in December, as many economists expect. The Fed’s central bank policy-setting committee started a two-day meeting on Tuesday.
“The drift of data suggests that the first time the Fed will raise rates will be in the spring,” said Steve Blitz, chief economist at ITG Investment Research.
Nondefense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, slipped 0.3 percent last month after a downwardly revised 1.6 percent decline in August, the Commerce Department said.
These so-called core capital goods were previously reported to have dropped 0.8 percent in August. The data was the latest dour news for manufacturing, which has borne the brunt of the strengthening dollar, energy sector investment cuts and the inventory correction.
Data ranging from trade to retail sales and industrial production have all suggested a significant loss of momentum in the third quarter.
Housing continues to outperform the economy. A second report on Tuesday showed the Standard & Poor’s Case-Shiller composite index of home prices in 20 metropolitan areas increased 5.1 percent in August from a year ago after rising 4.9 percent in July.
According to a Reuters survey of economists, gross domestic product most likely expanded at a 1.6 percent annual rate in the third quarter, slowing from a brisk 3.9 percent pace in the second quarter. The government will publish its advance third-quarter G.D.P. estimate on Thursday.
A 2.9 percent decline in transportation equipment spending helped to weigh down overall orders for durable goods — items ranging from toasters to aircraft that are meant to last three years or more — which fell 1.2 percent last month.
Durable goods inventories fell 0.3 percent, the largest drop since May 2013, while unfilled orders declined 0.6 percent.
In a separate report, the Conference Board said its consumer sentiment index fell to 97.6this month from a reading of 102.6 in September. Consumers were less optimistic about the labor market, and the share of those anticipating more jobs in the months ahead slipped.
The proportion of consumers expecting their incomes to increase dropped, and the number who expected a drop in their income rose. The downbeat assessment of the labor market follows a step down in job growth in August and September.
Publisher: Reuters/New York Times
Link: http://www.nytimes.com/2015/10/28/business/economy/economic-gauges-weaken-pointing-to-sharp-drop-in-growth.html?ref=economy&_r=0
