A preliminary report released Monday showed a drop in a key benchmark for future business spending, as total orders and shipments of durable goods were mixed, according to the Commerce Department.

New orders for "core capital goods minus aircraft" in the U.S. fell 0.2% in May from the month before, the largest drop since December and well below analysts’ expectations. Shipments of these items fell 0.2% last month following a small April rise.

The shipments figures are used by the federal government in calculating its measurement of the nation’s gross domestic product, the widest measure of how the overall economy is performing.

The same report also showed total new orders for durable goods (items designed to last three years or more) fell 1.1% in May from the month before, the second straight monthly decline and the biggest drop since November.

Shipments increased 0.8%, the first rise after two consecutive monthly drops, but it's not expected to be part of an improving trend.

Rather, this suggests that the early year surge in overall factory activity is fading, according to Tim Quinlan, senior economist at Wells Fargo Securities.

The difference between monthly survey data (such as regional surveys from the Institute for Supply Management) and the relatively weak numbers for core capital spending remains wide and is an indication the factory sector will slow, he said.

According to Reuters, this report has added to growing worries that an acceleration in economic growth in the second quarter may not be as robust as expected. Recent numbers on retail sales, manufacturing production and inflation have been disappointing, and housing data has been mixed the past couple of months.

MarketWatch reported this most recent decline in factory activity may be due to businesses that were eagerly anticipating tax and regulatory relief from the Trump administration may now be taking a more wait-and-see attitude, especially as Congress aims to revamp the nation’s health-care system yet again.

This report follows one from Friday that showed overall factory activity in June hit a nine-month low due to softer rates of output and new business growth.

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Evan Lockridge

Evan Lockridge

Former Business Contributing Editor

Trucking journalist since 1990, in the news business since early ‘80s.

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