The renaissance in capital spending the tax cut was supposed to bring about isn’t showing up in the economic data.
The Commerce Department on Friday reported that orders for durable goods—long-lasting equipment like tractors and machinery—dropped 1.7% in April from a month earlier. That decline was driven by a drop in aircraft orders, however. Orders for nondefense capital goods excluding aircraft, which economists follow closely to gauge where capital spending is going, increased by 1% to a seasonally adjusted $67.3 billion after falling 1.2% in March.
These orders have been hovering around the same level for the past half year, though. Given how much money the corporate tax cut is providing companies, and how much money is being repatriated from overseas as a result of the tax law’s provisions, this is something of a surprise.
It also seems at odds with what companies are saying. U.S. chief financial officers surveyed in the first quarter by Duke University’s Fuqua School of Business said they expected capital spending at their companies would be up an average of 11% over the next 12 months from the previous year. Capital spending at S&P 500 companies was up smartly in the first quarter, according to a Credit Suisse analysis.