- U.S. Capital Goods Orders Rose More Than Forecast in December
Orders for U.S. capital goods advanced more than forecast in December, showing businesses were adjusting investment plans amid prospects for stronger economic growth.
Bookings for non-military equipment excluding planes climbed 0.8 percent after increasing an upwardly revised 1.5 percent in November, data from the Commerce Department showed Friday. Orders for all durable goods — items meant to last at least three years — unexpectedly fell 0.4 percent due to a slump in the volatile military aircraft category.
More demand for capital goods, including machinery, electrical gear and communications equipment, is a sign that businesses might be following up buoyant post-election sentiment by spending more after years of tepid global growth and an energy-price slump. Further gains in investment that could contribute more to economic growth might depend on how quickly the Trump administration and Congress ease regulations and revamp corporate tax policy.
“Capex has been disappointing in recent years, and a second consecutive positive report would suggest that we have finally reached a floor and may start to see greater investment,” Bank of America Merrill Lynch economists, including Ethan Harris, head of global economics research, said in a note to clients before the report.
The median forecast of economists surveyed by Bloomberg projected a 0.2 percent increase in orders for non-defense capital goods orders excluding aircraft.
Shipments of such capital equipment, which are used in calculating gross domestic product, climbed 1 percent in December, the most since July 2015. They were up 0.6 percent the prior month, revised from a 0.2 percent gain.
In a separate report from the Commerce Department Friday, fourth-quarter GDP rose an annualized 1.9 percent, according to the government’s first estimate. Spending on equipment climbed at a 3.1 percent rate, the first increase since the third quarter of 2015.
A 42.4 percent December surge in commercial aircraft bookings helped ease the sting of a 63.9 percent plunge in orders for military aircraft, the durables data showed. Orders for non-defense goods increased 1.7 percent.
Boeing Co., the Chicago-based aerospace company, said it received 290 orders in January, the most since July 2014 and up from 13 orders in November.
Excluding transportation equipment demand, which is volatile from month to month, bookings increased 0.5 percent in December after a 1 percent gain the prior month, the durable goods report showed.
Durable goods inventories were little changed after a 0.2 percent increase in November. Unfilled orders for non-defense capital goods excluding aircraft rose 0.5 percent for a second month.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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