WASHINGTON: New
orders for key US-made capital goods rose modestly in July while shipments fell
by the most in nearly three years, pointing to continued weakness in business
investment and a slowdown in economic growth early in the third quarter.
Meanwhile, a continued rebound in sales of American planes lifted the US
durable goods sector for the second straight month in July, according to data
released yesterday. But the increase in sales of big-ticket US-made goods, the
largest jump in nearly a year, hid weaker-than-expected results in the rest of
the sector amid President Donald Trump's worsening trade war.

A measure widely
seen as a proxy for business investment, which has suffered since late last
year, rose for the third month in a row, but at a sluggish pace and economists
said the numbers clearly point to a slowing trend. New orders for durable goods
rose by a better-than-expected 2.1 percent in July to $250.4 billion, the
largest increase since August of last year, according to the Commerce
Department.

But June's result
was revised downward slightly from a prior estimate. And so far this year,
orders are up a paltry 0.3 percent over the same period in 2018. Coming against
the backdrop of an escalation in trade tensions, the report from the Commerce
Department yesterday could provide more ammunition for the Federal Reserve to
cut interest rates again next month.

Fed Chair Jerome
Powell told a conference of central bankers last week that trade policy uncertainty
seems to be playing "a role in the global slowdown and in weak
manufacturing and capital spending in the United States." Though Powell
described the economy as being in a "favorable place," he reiterated
that the US central bank would "act as appropriate" to keep the
longest economic expansion in history on track. The Fed lowered its short-term
interest rate by 25 basis points last month for the first time since 2008,
citing trade tensions and slowing global growth. Financial markets have fully priced
in another quarter-percentage-point cut at the Fed's Sept. 17-18 policy
meeting.

Orders for
non-defense capital goods excluding aircraft, a closely watched proxy for
business spending plans, increased 0.4 percent last month, the government said,
driven by strong demand for electrical equipment, appliances and components.
Data for June was revised down to show these so-called core capital goods
orders advancing 0.9 percent instead of surging 1.5 percent as previously
reported. Economists polled by Reuters had forecast core capital goods orders
would fall 0.1 percent in July. Core capital goods orders increased 1.5 percent
on a year-on-year basis.

Shipments of core
capital goods fell 0.7 percent last month, the biggest drop since October 2016.
Core capital goods shipments are used to calculate equipment spending in the
government's gross domestic product measurement. Data for June was revised down
to show core capital goods shipments were unchanged instead of rising 0.3
percent as previously reported. US stock index futures held gains after the
release of the data while yields on US Treasuries were largely unchanged. The
dollar was trading higher against a basket of currencies.

Shipments fall

Business
investment has been weak, largely blamed on the Trump administration's trade
war with China, which is taking a toll on global economies and US
manufacturing. President Donald Trump on Friday announced a new round of
tariffs on Chinese imports, hours after Beijing unveiled retaliatory tariffs on
$75 billion worth of US goods.

Business
investment contracted in the second quarter for the first time since the first
quarter of 2016. Weak business investment is underscored by manufacturing,
where output has contracted for two straight quarters. Manufacturing, which
accounts for about 12 percent of the economy, is also being undercut by an
inventory bloat and design problems at Boeing. In July, orders for electrical
equipment, appliances and components jumped 1.1 percent.

But orders for
machinery fell 0.6 percent. There was also declines in orders for primary
metals and fabricated metal products. Overall orders for durable goods, items
ranging from toasters to aircraft that are meant to last three years or more,
increased 2.1 percent in July, the most since August 2018, after rising 1.8
percent in the prior month. Orders for transportation equipment jumped 7.0
percent after gaining 4.1 percent in June. Motor vehicles and parts orders rose
0.5 percent last month. Orders for non-defense aircraft and parts increased
47.8 percent. - Agencies