Interest Rate Increases Are Being Felt, New Orders For U.S. Goods Are Starting To Take The Impact!

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 New orders for US-made capital goods fell in December, while shipments fell for the second month in a row, suggesting that higher borrowing costs are weighing on the manufacturing industry.


Orders for non-defense capital goods excluding aircraft, slipped 0.2% last month, the Commerce Department said on Thursday. These core capital goods orders were unchanged in November.


Economists polled by Reuters at the same time had also forecast core capital goods orders falling 0.2%. Core capital goods orders rose 8.3% on a year-on-year basis in December.



Higher interest rates reduce demand for goods, which are mostly bought on credit. The appreciation of the dollar in the past and weak global demand also hurt manufacturing, which accounts for 11.3% of the U.S. economy. In addition, spending is also shifting back to services.


The Fed last year raised its policy rate by 425 basis points from near zero to a range of 4.25%-4.50%, the highest since late 2007.


Shipments of core capital goods fell 0.4% after falling 0.2% in November. Shipments of core capital goods are used to calculate equipment expenditure in the measure of gross domestic product. Business spending on equipment contracted in the fourth quarter


The fall in new order bookings is a string of interest rate hikes that have weighed on industry and consumers. The market is now focused on the statement that will be released by the FOMC next week.

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