US confident despite dip in spending plans

New york. Photo / Getty Images

A gauge of US business investment plans fell in November and the prior month's increase was revised sharply lower as the drag on manufacturing from a strong dollar and spending cuts in the energy sector showed little sign of abating.

But the outlook for the US economy remains encouraging, with other data showing consumer sentiment at a five-month high in December and personal income rising for an eighth straight month in November.

That should support consumer spending and economic growth in the fourth quarter and early in 2016.

"The gain in income should prove a tailwind to fourth-quarter GDP growth as consumption remains the most prominent driver of domestic growth activity," said Gennadiy Goldberg, an economist at TD Securities in New York.

The Commerce Department said non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4 per cent last month.

October's increase in orders for these so-called core capital goods was revised down to 0.6 per cent from 1.3 per cent.

Manufacturing, which accounts for 12 per cent of the economy, has also been hit by efforts by businesses to reduce an inventory bloat and sluggish global demand, which has curtailed new orders growth.

Plunging crude oil prices have put pressure on oilfield services firms like Schlumberger, forcing them to slash capital spending budgets.

A survey this month showed manufacturing contracted in November for the first time in three years. Economists polled by Reuters had forecast core capital goods orders dipping 0.1 per cent last month.

Core capital goods shipments fell 0.5 per cent last month after October's downwardly revised 1 per cent drop.

Shipments of these goods are used to calculate equipment spending in the Government's gross domestic product measurement. They were previously reported to have declined 0.5 per cent in October.

- AAP