US Business Investments Sluggish

WASHINGTON (Dow Jones) -- U.S. business investment remained sluggish late this year, though progress on trade deals and an improving global economy hold promise for a pickup in 2020.

A key proxy for business investment -- orders for nondefense capital goods excluding aircraft -- rose 0.1% in November from October, the Commerce Department said Monday. Such orders rose 0.5% from a year earlier, the first year-over-year improvement for the gauge since June -- but still well below the pace of inflation.

"It's not a disaster," Capital Economics economist Paul Ashworth wrote in a note to clients. "But business equipment investment was still close to stagnant."

Weak business investment was a drag on U.S. economic growth in the second and third quarters and is likely to do little to support growth in the fourth quarter, which ends next week. The Federal Reserve Bank of Atlanta on Monday projected the U.S. economy would grow at a 2.3% pace in the fourth quarter, with business investment nearly flat.

There are prospects for an improvement in business investment in 2020. Monday's data reflected orders placed in November, ahead of a string of economic news in recent weeks that was largely seen as positive for manufacturers. That included progress in trade talks between the U.S. with China, completion of a new trade deal with Canada and Mexico and Federal Reserve policy makers saying they intend to maintain the current low level of interest rates.

"The easing of trade tensions...between the U.S. and China might ease some of the uncertainty, and lead to an improvement in this area," Michael Moran, an economist at Daiwa Capital Markets, wrote to clients.

Overall orders for durable goods fell 2% from the prior month. Much of the decline was due to a sharp pullback in orders for military equipment. Last week, Congress passed a defense-spending bill that could stoke defense demand.

Prior to November, demand for long-lasting goods had been trending higher since June, an improvement from the first half of the year. A persistent weak spot, however, has been the volatile civilian-aircraft category. Orders for nondefense airplanes and parts were down 26% from a year earlier in November.

Boeing Co., the nation's largest aircraft maker, has seen orders decline since its 737 Max jetliner was grounded globally in March following two fatal crashes. The company said last week it planned to halt 737 Max production in January, a move J.P. Morgan economists estimated would subtract 0.5 percentage point from first-quarter 2020 economic growth. On Monday, the aerospace giant replaced its chief executive.

Separately, the Commerce Department said sales of newly built, single-family homes rose 1.3% in November from the prior month, a sign the housing market is enjoying a long-awaited pickup amid low interest rates and steady economic growth. Sales are up about 10% through 11 months in 2019 from 2018.

The supply of available homes has declined from a year earlier, pushing prices up. The median sale price of a new home in November was up 7.2% to $330,800 from the same month a year ago.