The oil sector is dragging on overall capital goods spending.
In a note Thursday, Pantheon Macro’s Ian Shepherdson wrote that that in the three months leading up to February, non-defence capital goods orders fell at a 7.6% annualized rate, reversing the upward trend seen during the preceding three months.
And because the NFIB survey of small businesses showed that their capex is growing in the double-digits, the slowdown in non-defence capex is likely coming from the oil sector according to Shepherdson.
The plunge in oil rig counts is more evidence of pressure in the sector, as companies use their resources more efficiently. And the decline doesn’t appear to be over yet.
“Oil output is still rising as producers consolidate drilling into an ever-shrinking number of rigs, but their appetite for exploration has evaporated. With oil prices unlikely to recover anytime soon, in our view, the crunch in capital spending in the sector has some way yet to run,” Shepherdson writes.