US durable goods orders slid 2.2 percent in May

A category that tracks business investment also fell for the second straight month.

“The manufacturing sector has faced pressure since late 2014 from falling oil prices, which squeezed domestic energy production, and lackluster demand for US exports, partly reflecting a strong dollar”, The Wall Street Journal said.

Excluding transportation equipment, orders declined 0.3 percent, the most since February, after a 0.5 percent advance a month earlier.

Shipments of core capital goods, which are used to calculate equipment spending in the government’s gross domestic product measurement, slipped 0.5 percent last month after an upwardly revised 0.6 percent rise in April.

US financial markets were little moved by the report as investors weighed the implications of Britain’s vote to leave the European Union.

“While the pace of decline has moderated…orders growth remains negative, suggesting continued weakness in business investment”, BNP Paribas economist Laura Rosner said in a note to clients.

These so-called core capital goods orders were previously reported to have declined 0.6 percent in April and had been forecast rising 0.3 percent last month.

Those headwinds had been expected to fade. But following Thursday’s vote in the U.K.to pull out of the European Union, the dollar strengthened and oil prices dropped.

However events evolve in the coming weeks and months, USA firms already were pulling back on their capital expenditures.

Following the weak core capital goods orders figures, the Atlanta Fed lowered its second quarter GDP estimate by two-tenths of a percentage point to a 2.6 percent annual rate. On Friday, June 24, 2016, the Commerce Department releases its May report on durable goods.

Ms. Yellen told lawmakers this week that soft business investment since the recession might reflect broader trends.

Core capital orders sank 0.7% in May, a sign that companies are still not investing as much as they normally do when the economy is growing.

“Business investment is slowing and this makes us question the outlook going forward”.

Once this shock ripples through financial markets, Michael Feroli, chief USA economist at JPMorgan Chase & Co.in NY said he will be watching manufacturing surveys and jobless claims “for any evidence that businesses are getting more cautious”. The economy grew at a 0.8 percent pace in the first quarter.

Manufacturing accounts for about 12 percent of the USA economy.