US: equipment costs increase as a reason for the dollar's growth

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New orders for major capital goods produced in the United States, increased in January to a maximum over the past six months. While supply volumes increased, it indicates a significant increase in business spending on equipment at the beginning of the year. A stronger than expected US Department of Commerce report led economists to update low growth estimates for the first quarter.

The high volumes of supplies of major capital goods suggest that equipment costs have maintained steady growth after accelerating in the fourth quarter. Thus, this may raise GDP growth forecasts in the first quarter after they fell to a level of 0.2% on an annualized basis. The US economy is also losing momentum. The trade war between the United States and China, the slowdown of the global economy, and the uncertainty over the UK's withdrawal from the EU are serious factors affecting activity.

Moreover, the slowdown in domestic and global growth holds back inflation, even though a hard labor market contributes to wage growth. Increased productivity hinders companies' labor costs, and the strengthening of the dollar last year affects the cost of imported goods. Slowdown and restrained inflation, in turn, support the non-aggression attitude of the Fed towards a further increase in interest rates this year. So far, the dollar has managed to cope with the negative influence of a number of the factors listed above, but this cannot last forever. Currency for a normal "well-being" needs a serious impulse.

The material has been provided by InstaForex Company - www.instaforex.com