Sunday, May 20, 2018
Business

U.S. economic growth slows under weak corporate spending

WASHINGTON — Companies are holding off on purchases of computers, industrial equipment and other long-lasting manufactured goods, a trend that's slowing the U.S. economy.

A fourth straight month of lackluster corporate spending led many economists Thursday to trim their forecasts for growth in the July-September quarter. The government will issue its first estimate of third-quarter growth today, the last snapshot of overall economic activity before the presidential election.

Orders for durable goods, products expected to last at least three years, rose 9.9 percent in September, the Commerce Department said. But most of the increase was driven by a spike in aircraft orders, which are volatile and plummeted in the previous month.

Economists pay closer attention to core capital goods, which include machinery and computers but exclude aircraft. And shipments of those goods fell for the third straight month. That means business spending on equipment and software likely declined 4.9 percent in the July-September quarter, economists noted. It would represent the first drop in that category since the recession.

The disappointing report on durable goods led several economists to downgrade their forecasts for third-quarter economic growth. Michael Feroli, an economist at JPMorgan Chase, lowered his forecast to an annual rate of 1.6 percent, down from 1.8 percent. Peter Newland, an economist at Barclays Capital, reduced his forecast to a rate of 1.8 percent from 2 percent.

Either figure would reflect little improvement from the April-June growth rate of only 1.3 percent.

Business investment has slumped even as consumers have become more hopeful about the economy in recent months. Consumer confidence rose in October to a five-year high. Retail spending increased in September, mainly because Americans bought more cars, iPhones and appliances. And home sales are up this year, contributing to a nascent housing recovery.

Meanwhile, sluggish business investment has dragged on job creation at U.S. factories. Manufacturers slashed 20,000 jobs in the third quarter. Factories had added 194,000 jobs in the previous three quarters.

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