Demand for US-made capital goods declines

Demand for US-made capital goods recorded its biggest drop in eight months in September, a cautionary note for an economy that otherwise seems to be moving forward at a steady clip.

A moderation in home price gains in August, also reported on Tuesday, offered a further suggestion the economy may have cooled a bit, although consumer confidence jumped to a seven-year high this month.

“The weak capital goods orders and house price data confirm the slowdown in activity, but the burst in consumer confidence suggests that US households are very optimistic about the outlook,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 1.7% last month, the Commerce Department said. It was the largest drop in so-called core capital goods demand since January, and it surprised economists who had expected a 0.6% gain.

Some analysts blamed the weakness on slowing growth in China and the eurozone, but they said there was no reason for alarm, noting that an array of other manufacturing indicators have remained relatively strong.

“You have to look at the comprehensive evidence we have seen regarding manufacturing, and it tells you the manufacturing sector is doing fine,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.