WASHINGTON (Reuters) -New orders for key U.S.-manufactured capital goods unexpectedly fell in June, suggesting a pullback in business spending on equipment as the boost from front-loading of activity ahead of tariffs on imports faded.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.7% last month after an upwardly revised 2.0% rebound in May, the Commerce Department’s Census Bureau said on Friday.
Economists had forecast these so-called core capital goods orders would rise 0.2% after a previously reported 1.7% jump in May. Shipments of core capital goods increased 0.4% after rising 0.5% in May. Business spending on equipment accelerated sharply in the first quarter amid front-running ahead of President Donald Trump’s aggressive and broad tariffs on imports.
While some of the tariff-related spending to avoid even higher goods prices has persisted, uncertainty over where tariff levels will eventually settle has prompted some businesses to hold off capital expenditures.
A survey from S&P Global on Thursday showed its flash manufacturing PMI contracted in July for the first time since December. S&P Global noted that “any protectionist benefits of import tariffs were often outweighed by concerns over higher prices and rising costs.”
The Atlanta Fed is forecasting economic growth will rebound at a 2.4% annualized rate in the second quarter, largely reflecting a reversal in import flows, which contributed to GDP contracting at a 0.5% pace in the first quarter.
(Reporting by Lucia Mutikani; Editing by Paul Simao)