By Lucia Mutikani

WASHINGTON, (Reuters) – New U.S. capital goods orders increased faster than anticipated in September, and shipments soared. This indicates strong business spending on machinery, but stretched supply chains may have hampered economic growth during the third quarter.

Other data released Wednesday by the Commerce Department showed that the deficit in goods trade grew sharply over the last month and exports were falling. This reinforced slower growth expectations. Wholesale inventories rose, but stocks at retail fell. This was despite a rapid decline in supply at automotive dealerships due to a global shortage of semiconductors.

These reports were made public ahead of Thursday’s release of government data on third quarter GDP. It is anticipated that the report will show the slowest pace of growth since the second quarter 2020, which saw the economy shrink sharply following the stricter mandatory measures implemented to stop the first round of COVID-19-related infections.

Christopher Rupkey from FWDBONDS, New York, said that the third quarter might be the worst quarter for economic growth since over a decade. However, you wouldn’t know this if you looked at record business capital expenditures set in October. The slowdown in consumer spending is being overlooked by business. They are betting that consumers will return later in the year to clear out the shelves and shop at the malls and shops.

The 0.8% increase in orders for non defense capital goods, which exclude aircraft, was closely watched by business executives. The August data was adjusted lower in order to reflect core capital goods orders increasing 0.5% rather than 0.6%, as originally reported.

Reuters polled economists to predict that core capital goods orders would rise 0.5%. The orders for machine, primary metals, and fabricated products rose. However, orders for components, electrical equipment and appliances fell, as well as those for electronic products and computers, probably due to a worldwide shortage of chips.

Core capital goods shipment rose by 1.4% in September, after an August increase of 0.6%. These shipments can be used for the calculation of equipment spending within GDP measurements.

According to economists, the fourth quarter’s GDP report will show that business continues to invest in equipment. Some economists expect even more decline due to an acute shortage of motor vehicles, which has lowered automobile sales.

The U.S. stock market opened slightly higher due to a new batch of positive earnings reports. A basket of currencies weakened the dollar. Higher U.S. Treasury Prices

SUPPLY BOTTLENECKS

Due to the shift in demand toward goods, the COVID-19 pandemic caused severe labor disruptions. This led to unprecedented supply chain bottlenecks that economists expect will continue through 2022.

The order book for durable goods (equipment that can last up to three years) fell 0.4% in September after an increase of 1.3%. After a 3.8% increase in August, they were hit by a 2.3% drop in transportation equipment orders. This was primarily due to motor vehicle shortages which led orders falling 2.9%, after plummeting 3.9% in August.

The August soared 63.9%, but orders for civil aircraft fell by 27.9%. Boeing (NYSE: ) stated on its website it received 27 orders for aircraft last month, compared with 53 in August. The number of unfilled durable goods orders increased 0.7%, compared to 0.9% for the preceding month.

Also, the flow of goods was disrupted. The Commerce Department reported Wednesday that the September goods trade deficit rose to $96.3 million, an increase of 9.2%. Exports fell by 4.7% while imports grew 0.5%.

Wholesale inventories also increased by 1.1%, according to the report. The 0.2% drop in retail inventories was due to a 2.4% decline at auto dealers. The retail inventories, which exclude autos and go into the calculation for GDP, increased 0.6%

A Reuters survey found that the economy grew by 2.7% annually in the third quarter, according to economists. This would represent a decrease from the 6.7% growth rate recorded in the second quarter. In the first half, inventories were low. According to economists, the rate of decline slowed in the third quarter. This is responsible for most of the expected GDP growth.

The trade sector has been slowing GDP growth over the last year. However, inventories have decreased output twice in a row.