WASHINGTON (Reuters) - New orders for U.S.-made capital goods rose less than expected in March, but a second straight monthly increase in shipments suggested business investment accelerated in the first quarter amid a recovering energy sector.
While other data on Thursday showed a bigger-than-expected increase in first-time applications for unemployment benefits last week, the trend in claims remained consistent with tightening labor market conditions.
The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.2 percent last month after gaining 0.1 percent in February. Orders for these so-called core capital goods have now increased for six consecutive months.
Shipments of core capital goods rose 0.4 percent after jumping 1.1 percent in February. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.
"Business investment appears to have some better momentum early in 2017 and, while growth is far from hot, we appear to be transitioning away from the declines that plagued much of 2016," said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto.
Economists had forecast core capital goods orders rising 0.5 percent last month. The dollar rose marginally against a basket of currencies, while U.S. stocks were little changed. Prices for U.S. Treasuries were trading mostly higher.
March's small increase in core capital goods orders suggests moderate business investment growth in the second quarter. It also implies a moderation in the manufacturing sector activity after recent strong growth.
Manufacturing, which accounts for about 12 percent of the U.S. economy, could get a lift from President Donald Trump's proposed tax plan, announced on Wednesday, that includes cutting the corporate income tax rate to 15 percent from 35 percent.
For now, manufacturing is being underpinned by the energy sector revival. Energy services firm Baker Hughes BHI.N said last Friday that U.S. oil rigs totaled 688 in the week ending April 21, the most in two years. U.S. drillers have added oil rigs for 14 straight weeks and shale production in May was set for its biggest monthly increase in more than two years.
Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, increased 0.7 percent after surging 2.3 percent in February.
Business spending on equipment is expected to have accelerated from the fourth-quarter's annualized 1.9 percent growth pace and will likely be one of the few bright spots when the government publishes its advance first-quarter GDP estimate on Friday.
WEAK FIRST-QUARTER GDP
Other data from the Commerce Department on Thursday showed the goods trade deficit widening 1.4 percent in March. Though retail inventories increased 0.4 percent last month, stocks of goods at wholesalers dipped 0.1 percent.
In the wake of the data, the Atlanta Federal Reserve cut its first-quarter GDP growth estimate by three-tenths of a percentage point to a 0.2 percent rate, which would be the weakest performance in three years. The economy grew at a 2.1 percent pace in the fourth quarter.
With the labor market near full employment, the anticipated slowdown in growth likely understates the health of the economy. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits rose 14,000 to a seasonally adjusted 257,000 for the week ended April 22.
Claims have now been below 300,000, a threshold associated with a healthy labor market, for 112 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. Economists had forecast first-time applications for jobless benefits rising to 245,000 last week.
"Despite this week's rise, we believe that the labor market remains solid and see no pattern in the underlying state data to give us pause on that assessment," said Rob Martin, an economist at Barclays in New York.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 500 to 242,250 last week, the lowest level since February.
Other data from the National Association of Realtors showed contracts to buy previously owned homes fell 0.8 percent in March, suggesting a persistent shortage of properties could hurt sales for the rest of the spring season. Home resales hit a 10-year high in March.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)