By Lindsay Dunsmuir
WASHINGTON (Reuters) - New orders for key U.S.-made capital goods fell more than expected in September and shipments also declined, a sign that business investment remains soft amid the fallout from the U.S.-China trade war but other data on Thursday showed the spat has yet to have much effect on the overall jobs market.
The Commerce Department said orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, fell 0.5% last month on less demand for transportation equipment, motor vehicles and parts, and computers and electronic products.
The auto sector was bruised by an ongoing strike at General Motors (NYSE:GM). The United Auto Workers union reached a tentative agreement with the Detroit automaker last week on a new four-year-contract but members remain off work until they finish voting on the proposal this Friday.
Data for August was also revised down to show core capital goods orders falling 0.6% instead of declining 0.4% as previously reported. Economists polled by Reuters had forecast core capital goods orders dipping 0.2% in September.
"The data are volatile, but through the volatility, trends have slowed significantly," said Jim O'Sullivan, an economist at High Frequency Economics. U.S. Treasury prices rose following the report while U.S. stocks were little changed.
Core capital goods orders increased 1.0% on a yearly basis while shipments of such goods dropped 0.7% last month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. Shipments for August were flat after being revised from a previously reported 0.3% gain.
The U.S. Federal Reserve has cut interest rates twice this year and investors currently see another reduction in borrowing costs when policymakers meet next week as the economy grapples with the headwinds from more than a year of U.S.-China tit-for-tat tariffs and slowing global growth.
The manufacturing sector, which makes up about 11% of the U.S. economy, has been hobbled by the trade dispute, which has hurt business confidence and investment, and cast a cloud of uncertainty over the economic outlook.
U.S. manufacturing output fell more than expected in September, Fed data showed last week while business investment fell at a 1.0% annualized rate last quarter, the biggest drop since the fourth quarter of 2015, the government reported last month.
Earlier this month, U.S. President Donald Trump outlined the first phase of a deal to end the trade war with China and suspended a threatened tariff hike, but officials on both sides said much more work needed to be done before an accord could be agreed.
Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, declined 1.1% in September after edging up a revised 0.3% in the prior month. Orders for non-defense aircraft and parts were hit hardest, slumping 11.8%, due to ongoing problems at Boeing (NYSE:BA).
LABOR MARKET STRENGTH
There were few signs, however, that the weakness was spreading to the jobs market. The number of Americans filing applications for unemployment benefits unexpectedly fell last week, pointing to a still-tight jobs market even as hiring and economic growth has slowed.
Initial claims for state unemployment benefits declined 6,000 to a seasonally adjusted 212,000 for the week ended Oct. 19, the Labor Department said on Thursday. Data for the prior week was revised to show 4,000 more claims than previously reported.
Economists polled by Reuters had forecast claims edging higher to 215,000 in the latest week. The Labor Department said no states had claims estimated last week.
The overall decrease was despite the General Motors strike. While striking workers are not eligible for unemployment benefits, the work stoppage has affected production, impacting non-striking employees at suppliers.
The four-week moving average of initial claims, considered a better gauge of labor market trends as it irons out week-to-week volatility, declined 750 to 215,000 last week.
Elsewhere, the Commerce Department reported on Thursday sales of new U.S. single-family homes dipped in September as low inventories continue to weigh on sales even as prices saw the biggest monthly fall in five years.
Sales declined 0.7% to a seasonally adjusted annual rate of 701,000 units last month, matching expectations, but sales were still up 15.5% from a year ago. August's sales pace was revised down to 706,000 units from the previously reported 713,000 units.
New home sales, which comprise about 11.5% of housing market sales, are drawn from permits and tend to be volatile on a month-to-month basis.