The Trump Tax Cut Driving Strong Business Investment
- Shipments of core capital goods rose 0.9% last month after an upwardly revised 0.9% gainer in June.
- US economy is growing at a 4.6% annualized rate in the third quarter following the government’s data on new-home sales and costs, the Atlanta Federal Reserve’s GDPNow forecast model showed Friday.
- New orders for Key US-made capital goods increased more than expected in July and growth in shipments held firm, signs that business investment started Q-3 on a strong note.
TheCommerce Department said on Friday orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 1.4% last month after an upwardly revised 0.9% increase in June.
Business spending on equipment is being supported by The Trump Administration’s $1.5-T income tax cut package, which came into effect in January.
But there is some concern that trade tensions between the United States and its major trade partners, including China, Canada, Mexico and the European Union, might offset the fiscal stimulus, but it is not very likely.
Economists polled by Reuters had forecast the core capital goods orders rising 0.4% in July after a previously reported 0.2% gainer in June. Core capital goods orders increased 7.2% on a Y-Y basis.
Shipments of core capital goods rose 0.9% last month after an upwardly revised 0.9% gainer in June.
Core capital goods shipments are used to calculate equipment spending in the government’s GDP (gross domestic product) measurement, so the higher estimate for shipments in June could contribute to an upward revision of overall economic growth in Q-2.
Business investment drove about a 25% of economic growth in the April-June frame, when the economy grew at its fastest pace in nearly 4 years as consumers boosted spending and farmers rushed shipments of Soybean to China to beat retaliatory trade tariffs before they took effect in early July.
Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last 3 years or more, fell 1.7% in July as demand for civilian aircraft fell.
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