New orders for US-made capital goods increased by the most in eight months in March, hitting their highest level on record and brightening the outlook for manufacturing and the economy.
While other data on Thursday showed the number of Americans filing claims for unemployment benefits last week was the largest in 19 months, that did not change views of a tightening labour market that is increasingly running out of workers. The reports underscored the economy's enduring strength as it prepares to celebrate a record 10 years of growth in July.
"Company CEOs may have feared recession in surveys taken at the start of the year, but those concerns have faded as businesses bring on new equipment to meet the demand for the goods and services they provide their customers," said Chris Rupkey, chief economist at MUFG in New York.
The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.3 percent to an all-time high of $70.0 billion, powered by a jump in demand for computers and electronic products.
The increase in these so-called core capital goods orders was the biggest since last July and followed a 0.1 percent gain in February. Economists polled by Reuters had forecast core capital goods orders only nudging up 0.1 percent in March. They increased 2.8 percent on a year-on-year basis.
But shipments of core capital goods slipped 0.2 percent in March after gaining 0.2 percent in the prior month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.
While March's drop in shipments suggested business spending on equipment slowed down in the first quarter that did not have an impact on economists' growth estimates for the period.
According to a Reuters survey of economists, gross domestic product probably increased at a 2.0 percent annualized rate in the first quarter. The economy grew at a 2.2 percent pace in the October-December period. The government will publish its snapshot of first-quarter GDP on Friday.
Business spending on equipment is expected to have slowed because of the delayed impact of sharp drops in oil prices toward the end of 2018 and fading depreciation provisions in the 2018 tax bill, as well as supply chain disruptions caused by Washington's trade war with China.
The dollar rose to a near two-year high against the euro, while US Treasury prices fell. Stocks on Wall Street were trading lower amid a mixed batch of corporate earnings.
In March, orders for machinery rose 0.3 percent after declining 0.7 percent in February. Orders for computers and electronic products soared 2.2 percent. There were also increases in orders for electrical equipment, appliances and components. But orders for primary metals fell, as did those for fabricated metal products.
Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, shot up 2.7 percent in March after declining 1.1 percent in the prior month. Orders for transportation equipment rebounded 7.0 percent after falling 2.9 percent in February.
Orders for motor vehicles and parts rose 2.1 percent in March. Orders for non-defense aircraft jumped 31.2 percent after plunging 25.4 percent in February.
Boeing reported on its website that it received 44 aircraft orders, up from only five in February. There were no orders booked for its troubled 737 MAX aircraft. Boeing's fastest-selling 737 MAX jet was grounded in March after two fatal plane crashes in five months.
In a separate report on Thursday, the Labour Department said initial claims for state unemployment benefits jumped 37,000 to a seasonally adjusted 230,000 for the week ended April 20. The increase was the largest since early September 2017.
Claims dropped to 193,000 in the week prior, which was the lowest level since September 1969. Economists had forecast claims rising to only 200,000 in the latest week. Claims tend to be volatile around this time of the year because of the different timings of Easter and Passover holidays, as well as spring breaks for schools and universities.
Despite the volatility, labour market strength remains intact. The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 4,500 to 206,000 last week.