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According to Bloomberg, orders for U.S. business equipment unexpectedly declined in May by the most in three months, pointing to weakness in investment even before the likely damage to confidence stemming from U.K. voters' decision to leave the European Union.
Bookings for non-military capital goods excluding aircraft dropped 0.7 percent after falling 0.4 percent in April, data from the Commerce Department showed Friday. Demand for all durable goods -- items meant to last at least three years -- slumped a more-than-expected 2.2 percent.
Sluggish global demand, the lingering effects of last year's surge in the dollar, weaker corporate profits and a sharp drop in spending in the energy sector have weighed on companies' investment decisions. American factories are now faced with a new challenge -- the fallout from the U.K.'s decision to exit the EU.
Once this shock ripples through financial markets, Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York said he will be watching manufacturing surveys and jobless claims "for any evidence that businesses are getting more cautious."
"Most consumers aren't going to have Brexit front and center of their economic decisions, whereas companies, particularly ones that are globally exposed, are going to have to reassess the situation," Feroli said.
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