Business Investment: One Step Forward, One Step Back
Revised data in the Census Bureau’s November 3 Factory Orders report showed that core capital goods orders between July and September posted a 1.7% gain over Q2, better than the advance estimate of 1.3%, but still a significant slowdown from the 7% gain in Q2 and 3.6% gain in Q1. Meanwhile, the gain in shipments slowed to 2.4% in Q3, better than the advance indication of 2.2%, a slowdown from 4.1% in Q2. In Q3, advance estimates of GDP indicated that investment in equipment and software grew at a significantly slower pace of 11% (slightly below our own expectations of 12%), but the revisions to the report on factory orders point to an upward revision to GDP data.
On the other hand, the 3.9% annualized q/q gain in non-residential structures is set for a heavy downward revision, likely to zero or barely positive growth, following the Census Bureau’s data on construction spending on November 1. Private non-residential spending (nominal) was revised down in July and August, and weakened further in September. As a result, average private nominal non-residential construction spending in Q3 showed a sharp 5.9% drop from Q2, (significantly worse than suggested by previously published estimates, which had indicated that the average annualized pace in July and August was 2.4% below the average for Q2).
Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE Clients:North America Focus: U.S.: Wage Growth Pickup Needed; Canada: Domestic Demand Concerns
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