U.S. durable goods orders, consumer sentiment fall on government shutdown
(Reuters) – Orders for a wide range of U.S.-made capital goods plummeted in September and consumer sentiment weakened sharply in October, signs that a budget battle in Washington has held back the economy.
New orders of non-military capital goods other than aircraft, an indicator of business spending plans, fell 1.1 percent last month, the Commerce Department said on Friday.
That could be a sign businesses were shutting their wallets as the fiscal debate was heating up in Washington.
A surge in volatile aircraft orders helped push overall orders of long-lasting factory goods to rise a more-than-expected 3.7 percent during the month.
But orders for durable goods, which include everything from toasters to tanks, fell 0.1 percent when factoring out transportation equipment.
The data suggests businesses may have scaled back investment plans as a political impasse in Washington threatened to lead the government to miss payments on its obligations, although firms also could be trimming these plans over more general doubts regarding the economy’s strength.
“We are looking at a situation where businesses were preparing for the chaos in Washington which actually happened,” said Joel Naroff, president of Naroff Economics Advisors in Holland, Pennsylvania.
The government impasse was eventually resolved in October, though not before a partial government shutdown left hundreds of thousands of people out of work for weeks and also delayed the release of a slew of economic data.
While the economy was already struggling before the government shutdown, economists estimate the shutdown will shave as much as 0.6 percentage point off annualized fourth-quarter gross domestic product through reduced government output and damage to both consumer and business confidence.
And even before the impasse, the pace of hiring by U.S. employers had slowed sharply in September.
Worries over the economic fallout helped push U.S. consumer sentiment in October to its lowest level since the end of last year, according to the Thomson Reuters/University of Michigan’s final reading of consumer sentiment for the month.