News Archive

Apple, Samsung settle U.S. patent dispute

(Reuters) – Apple Inc and Samsung Electronics Co Ltd on Wednesday settled a years long patent dispute, according to a filing the U.S. District Court for the Northern District of California. The terms of the settlement were not disclosed in the court filing.

FILE PHOTO: The Apple Inc. logo is shown outside the company’s Worldwide Developers Conference in San Francisco, California, U.S., June 13, 2016. REUTERS/Stephen Lam/File Photo

An Apple spokesman declined to comment on the terms of the settlement. Samsung did not immediately return a request for comment.

FILE PHOTO: The logo of Samsung Electronics is seen at its office building in Seoul, South Korea, March 23, 2018. REUTERS/Kim Hong-Ji/File Photo

The settlement ends a patent battle that Apple has waged against Samsung since 2011 over allegations that Samsung violated Apple’s patents by “slavishly” copying the design of the iPhone. In May, a U.S. jury awarded Apple $539 million.

Samsung had previously paid Apple $399 million to compensate for patent infringement. Samsung would need to make an additional payment to Apple of nearly $140 million if the verdict was upheld. How much, if anything, Samsung must pay Apple under Wednesday’s settlement could not immediately be learned.

Apple shares were up 0.3 percent at $184.79, while the Nasdaq Composite was down 1 percent. The Korea Exchange, where Samsung trades, is not currently open.

Reporting by Stephen Nellis in San Francisco; Editing by Lisa Shumaker

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U.S. gives Disney approval to buy Fox amid bidding war with Comcast

WASHINGTON (Reuters) – Walt Disney Co won U.S. approval to buy Twenty-First Century Fox Inc entertainment assets for $71.3 billion on condition it sell Fox’s 22 regional sports networks, the Justice Department said on Wednesday, giving Disney an edge over Comcast Corp’s competing bid.

FILE PHOTO: A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 14, 2017. REUTERS/Brendan McDermid

The Fox movie franchises and TV shows have been the subject of a bidding war between Disney and Comcast, both of which want to expand their own entertainment businesses to compete with fast-growing digital rivals Netflix Inc and Inc.

The deal does not include the nationally broadcast Fox News, Fox Business or Fox Sports networks.

If Disney prevails over Comcast, the combination would expand Disney’s unrivaled portfolio of some of the world’s most popular characters, uniting Mickey Mouse, Luke Skywalker and Marvel superheroes with Fox’s X-Men, “Avatar” and “The Simpsons” franchises.

Disney owns ABC, Pixar, Marvel Studios and “Star Wars” producer Lucasfilm, plus an array of theme parks. The Fox assets being acquired include a cable group that includes FX Networks, National Geographic and 300-plus international channels plus Fox’s stake in Hulu.

Disney, which also owns sports network ESPN, has agreed to divest all of Fox’s regional sports networks, which provide sports programing for regional and local markets, such as Fox’s YES Network, which airs New York Yankees baseball games around the New York metro area.

FILE PHOTO: The 21st Century Fox logo is displayed on the side of a building in midtown Manhattan in New York, U.S., February 27, 2018. REUTERS/Lucas Jackson/File Photo

Together, Fox’s regional sports networks have about 61 million subscribers and have rights to broadcast live games of 44 of 91 U.S. professional sports teams in three of the four major sports leagues.

The Justice Department said that without the divestitures, “the proposed acquisition would eliminate the substantial head-to-head competition that currently exists between Disney and Fox and would likely result in higher prices for cable sports programing.”

Disney’s agreement with the government could be a setback for Comcast, which has yet to respond to Disney’s latest offer for Fox, unveiled last week. Comcast, whose offer is worth $65 billion, declined to comment.

Fox also declined to comment.

Disney said it was “pleased” with the agreement reached with the Justice Department and said it looked forward to creating “even more compelling consumer experiences.”

Analysts have antitrust concerns about Comcast’s competing bid, which would add Fox’s movie and TV studios to Comcast’s NBC Universal. Chief Executive Brian Roberts had said that Comcast was willing to offer the same conditions as Disney and promised to fight for the deal in court if necessary.

The sports networks could attract a variety of bidders among technology and media companies looking to get their hands on live sports, sources said, although the industry-wide growth of these local sports networks has declined in the past few years as more viewers cut the cord on traditional cable packages.

Reporting by Diane Bartz and David Shepardson; Additional reporting by Liana Baker; Editing by Jeffrey Benkoe, Marguerita Choy and Richard Chang

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Trump to use U.S. security review panel to curb China tech investments

WASHINGTON (Reuters) – U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.

The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control investment deals. The legislation expands the scope of transactions reviewed by the interagency panel to address security concerns, Trump said.

The decision marks a victory for Treasury Secretary Steven Mnuchin in a fierce White House debate over the scope of such curbs.

Mnuchin had favored a more measured and global approach to protecting U.S. technology, using authority approved by Congress, while White House trade adviser Peter Navarro, the administration’s harshest China critic, had argued for China-specific restrictions.

“We are not, on a wholesale basis, discriminating against China as part of a negotiation,” Mnuchin said on CNBC on Wednesday.

The investment restrictions are part of the administration’s efforts to pressure Beijing into making major changes to its trade, technology transfer and industrial subsidy policies after U.S. complaints that China has unfairly acquired American intellectual property through joint venture requirements, unfair licensing and strategic acquisitions of U.S. tech firms.

“I have concluded that such (CFIUS) legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said in a statement that did not specifically name China.

  • Mnuchin says new investment controls needed to protect U.S. tech: CNBC

U.S. stocks rose after Trump announced the new approach to U.S. investment restrictions but reversed gains in afternoon trading.

Senior administration officials told reporters on a conference call that sticking with CFIUS, a process companies are familiar with, would ensure strong inward investment into the United States while protecting the “crown jewels” of U.S. intellectual property.

Trump said in his statement that upon final passage of the legislation, known as the Foreign Investment Risk Review Modernization Act, he will direct his administration “to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies.”

If Congress fails to pass the legislation quickly, Trump said, he would direct the administration to implement new restrictions under executive authority that could be applied globally.

The decision to stick with CFIUS was a pragmatic move because the new CFIUS legislation “will put a crimp in China’s efforts to move up the value chain in high tech,” said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.

But it will likely do little to stop the activation of U.S. tariffs on $34 billion worth of Chinese goods, scheduled for July 6, or jump-start trade negotiations between the two economic superpowers, Kennedy said.

And the mixed messages from the administration do not help Trump’s negotiating position, he said.

“It shows the Chinese that the Trump administration is still undependable and can be moved back from the most hardline positions,” Kennedy added.

FILE PHOTO: U.S. President Donald Trump speaks during a lunch meeting with Republican members of Congress at the White House in Washington, U.S., June 26, 2018. REUTERS/Kevin Lamarque

Mnuchin on CNBC downplayed the dissent within the administration, saying that Trump wants to hear differing views on important issues, but the administration’s economic team typically comes together on major recommendations such as the investment restrictions.

Mnuchin said the new CFIUS legislation, passed 400-2 in the House of Representatives on Tuesday, would broaden the types of transactions that could be reviewed by the panel on national security grounds, including minority stakes, joint ventures and property purchases near U.S. military bases.

“This isn’t a question about being weak or strong, this is about protecting technology. We have the right tools under this legislation to protect technology,” Mnuchin said.


Trump also said that he has directed Commerce Secretary Wilbur Ross to examine U.S. export controls and recommend modifications that may be needed “to defend our national security and technological leadership.”

A Commerce Department spokesman could not be immediately reached for comment on the study.

The CFIUS legislation is headed for negotiations between U.S. House and Senate lawmakers in the coming weeks to craft a final version, with guidance from the Treasury.

A sticking point that could emerge is language in the Senate version that would reinstate the ban on Chinese telecom equipment maker ZTE Corp (000063.SZ) from purchasing U.S. components for a year. The Commerce Department ban had effectively shut the Shenzhen-based company down, angering Beijing.

The House version has less stringent language prohibiting the U.S. Department of Defense from purchasing any ZTE communications gear.

Reporting by David Lawder; Editing by Jeffrey Benkoe and Steve Orlofsky

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Automakers warn U.S. tariffs will cost hundreds of thousands of jobs, hike prices

WASHINGTON (Reuters) – Two major auto trade groups on Wednesday warned the Trump administration that imposing up to 25 percent tariffs on imported vehicles would cost hundreds of thousands of auto jobs, dramatically hike prices on vehicles and threaten industry spending on self-driving cars.

FILE PHOTO: A logo of Toyota Motor Corp is seen at the company’s showroom in Tokyo, Japan June 14, 2016. REUTERS/Toru Hanai

A coalition representing major foreign automakers including Toyota Motor Corp, Volkswagen AG (VOWG_p.DE), BMW AG, and Hyundai Motor Co, said the tariffs would harm automakers and U.S. consumers. The administration in May launched an investigation into whether imported vehicles pose a national security threat and President Donald Trump has repeatedly threatened to quickly impose tariffs.

“The greatest threat to the U.S. automotive industry at this time is the possibility the administration will impose duties on imports in connection with this investigation,” wrote the Association of Global Automakers representing major foreign automakers. “Such duties would raise prices for American consumers, limit their choices, and suppress sales and U.S. production of vehicles.”

The group added: “Rather than creating jobs, these tariffs would result in the loss of hundreds of thousands of American jobs producing and selling cars, SUVs, trucks and auto parts.”

On Friday Trump threatened to impose a 20 percent tariff on all imports of EU-assembled cars. On Tuesday Trump said tariffs are coming soon. “We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs. In the end it will all even out – and it wont take very long!” Trump tweeted.

The Alliance of Automobile Manufacturers, representing General Motors Co, Ford Motor Co, Daimler AG, Toyota and others, urged the administration in separate comments filed Wednesday not to go forward.

“We believe the resulting impact of tariffs on imported vehicles and vehicle components will ultimately harm U.S. economic security and weaken our national security,” the group wrote, calling the tariffs a “mistake” and adding imposing them “could very well set a dangerous precedent that other nations could use to protect their local market from foreign competition.”

The Alliance said its analysis of 2017 auto sales data showed a 25 percent tariff on imported vehicles would result in an average price increase of $5,800, which would boost costs to American consumers by nearly $45 billion annually.

Automakers are concerned tariffs will mean less capital to spend on self-driving cars and electric vehicles.

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“We are already in the midst of an intense global race to lead on electrification and automation. The increased costs associated with the proposed tariffs may result in diminishing the U.S.’ competitiveness in developing these advanced technologies,” the Alliance wrote.

Both automotive trade groups cited a study by the Peterson Institute for International Economics that the cost to U.S. jobs from the import duties would be 195,000 jobs and could be as high as 624,000 jobs if other countries retaliate.

The proposed tariffs on national security grounds have been met by opposition among many Republicans in Congress.

Trump has made the tariffs a key part of his economic message and repeatedly lamented the U.S auto sector trade deficit, particularly with Germany and Japan. Some aides have suggested that the effort is a way to try to pressure Canada and Mexico into making more concessions in ongoing talks to renegotiate the North American Free Trade Agreement.

U.S. Commerce Secretary Wilbur Ross said on Thursday the department aimed to wrap up the probe by late July or August. The Commerce Department plans to hold two days of public comments in July on its investigation of auto imports.

The Commerce Department has asked if it should consider U.S. owned auto manufacturers differently than foreign automakers.

The Association of Global Automakers rejected that contention, saying its members’ American workers “are no less patriotic or willing to serve their country in a time of crisis than any other Americans.”

The group questioned national security as grounds to restrict auto imports. “America does not go to war in a Ford Fiesta,” they added.

The Alliance said “there is no basis to claim that auto-related imports are a threat to national security” and noted that 98 percent of U.S. auto imports came from U.S. national security allies.

In 1941, there were 31 manufacturing facilities in the U.S producing fewer than four million vehicles, the Alliance said. By contrast, the United States now has 45 assembly plants – operated by both U.S. and foreign automakers. Those plants produced nearly 12 million vehicles in 2017, more than three times the production volume before World War II.

“We are confident that today’s U.S. production capabilities are more than sufficient to satisfy our country’s future security needs,” the Alliance wrote.

Reporting by David Shepardson

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Wall Street rally fizzles as tech stocks drag

(Reuters) – U.S. stocks reversed course on Wednesday, falling on renewed uncertainty regarding the U.S. stance on Chinese investments in American technology companies.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 25, 2018. REUTERS/Brendan McDermid

Earlier in the session, U.S. stocks rose as President Donald Trump said he will use a strengthened national security review panel — the Committee on Foreign Investment in the United States (CFIUS) — to deal with potential threats from Chinese acquisitions of U.S. technology, instead of imposing China-specific restrictions.

The decision was seen by investors as a somewhat softer approach than reported earlier plans to block firms with at least 25 percent Chinese ownership from buying U.S. tech firms.

But U.S. stocks moved lower after White House economic adviser Larry Kudlow later said in an interview on Fox Business Network that Trump’s announced plan did not indicate a softened stance on China.

The SP 500 technology sector .SPLRCT fell 1.0 percent, weighing the most on the broader SP 500 index. Chipmakers, which derive much of their revenue from China, fell even lower. The Philadelphia semiconductor index .SOX slid 2.0 percent.

“Investors are back in concern mode,” said Kate Warne, investment strategist at Edward Jones in St. Louis. “We had clarity this morning, but now that’s been removed.”

The Dow Jones Industrial Average .DJI fell 107.13 points, or 0.44 percent, to 24,175.98, the SP 500 .SPX lost 16.27 points, or 0.60 percent, to 2,706.79 and the Nasdaq Composite .IXIC dropped 89.88 points, or 1.19 percent, to 7,471.74.

The SP energy index .SPNY was up 1.2 percent, leading the gainers among the 11 major sectors, lifted by a jump in U.S. crude prices as plunging stockpiles compounded supply concerns. [O/R]

Though higher oil prices have boosted the energy sector of late, some investors raised concern that they may have a negative effect on other sectors.

“The historical concern is that as energy creeps higher, it saps demand from other parts of the economy,” said Douglas Burtnick, senior investment manager at Aberdeen Standard Investments in Philadelphia.

Conagra Brands Inc (CAG.N) dropped 6.7 percent after the company said it would buy Pinnacle Foods Inc (PF.N) for about $8.1 billion in cash and stock. Pinnacle Foods fell 4.0 percent after the deal announcement.

Declining issues outnumbered advancing ones on the NYSE by a 2.28-to-1 ratio; on Nasdaq, a 3.66-to-1 ratio favored decliners.

The SP 500 posted 12 new 52-week highs and 16 new lows; the Nasdaq Composite recorded 52 new highs and 71 new lows.

Additional reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta and Tom Brown

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Boeing’s engine proposal deadline looms for new mid-market jet: report

SEATTLE (Reuters) – Three of the largest engine makers face a Wednesday deadline to provide Boeing Co (BA.N) with formal proposals for how they would power the planemaker’s possible new mid-market jet, an aviation magazine reported.

FILE PHOTO: A Boeing logo is pictured during the European Business Aviation Convention Exhibition (EBACE) at Geneva Airport, Switzerland May 28, 2018. REUTERS/Denis Balibouse/File Photo

A Boeing spokesman declined to comment but said the Chicago-based planemaker continues “to make good progress” in developing the jetliner’s “business case.”

Boeing’s request for proposals would mark an important step toward bringing into service a jet with the potential to carve out new routes in 2025, though Boeing has stressed it would not be rushed into a decision on the plane.

CFM International – a joint venture between General Electric (GE.N) and Safran (SAF.PA) – Pratt Whitney (UTX.N), and Rolls-Royce (RR.L) were submitting proposals, the Air Current reported, citing unnamed sources.

Boeing is studying plans for what industry sources describe as a hybrid jet combining a wide cabin and a restricted cargo space, moulded to fly efficiently in a space between the industry’s single-aisle jets and wide-body long-haul aircraft.

Boeing aims to broadly replace its 757 model, a narrow-body jet with a single aisle. It envisions a mid-market jetliner with 220 to 270 seats and a range of up to 5,000 nautical miles, with global demand for 4,000 to 5,000 jets over 20 years, though rival Airbus (AIR.PA) disagrees with that forecast.

Boeing wants an engine that burns 25 percent less fuel for every pound of thrust it produces compared with the 757’s decades-old turbines, the Air Current reported. The timing for choosing either one or two manufacturers was not immediately clear, it said.

General Electric (GE.N) did not immediately respond to a request for comment. Rolls-Royce, which is facing problems with parts of the Trent 1000 engine that have led to the grounding of some 787s for repairs, said, “whenever an aircraft manufacturer comes forward with a proposal we will have a technology response.”

A Pratt Whitney (UTX.N) representative referred to comments made earlier this month by its commercial engine business chief Chris Calio: “I think the (Geared Turbofan engine) scales well, and so we’re always looking and interested in other applications for the GTF as long as it makes sense for us.”

Jefferies analyst Sandy Morris said in a research note that CFM “is likely to be the keenest contender”, and might offer a derivative of its GE9X engine, which serves the forthcoming 777X. He said he would be surprised if Pratt and Rolls were not also in the mix.

Reporting by Eric M. Johnson in Seattle; editing by Diane Craft

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Conagra to buy Pinnacle for $8.1 billion, creating frozen food powerhouse

(Reuters) – Conagra Brands Inc (CAG.N) said on Wednesday it would buy Pinnacle Foods Inc (PF.N) for about $8.1 billion, trying to grab a bigger share of the fast-growing snack and frozen food markets amid fierce competition in the packaged food industry.

The cash-and-stock deal, which would make Conagra the No. 2 U.S. frozen food maker by sales after Nestle (NESN.S), comes as demand rises for convenient, healthy ready meals, especially among millennials.

Conagra and Pinnacle Foods have been investing aggressively to become the two fastest-growing frozen meal companies, according to analysts, with such brands as Birds Eye, Power Bowls and Hungry-Man, which tout more protein and fewer artificial ingredients.

The combined market capitalization of Conagra and Pinnacle Foods is about $23 billion, on par with rival Kellogg Co (K.N). The deal comes at a time when scale and negotiating power are crucial to packaged goods companies being squeezed by high commodities and freight costs and pressure from retailers for low pricing.

“MA is a common theme we’re going to continue to see as the growth environment has slowed for many packaged goods companies,” Edward Jones analyst Brittany Weissman said, adding that many in the industry considered the deal “inevitable.”

“There are benefits to MA on the cost side of things from buying power to supply chains, by being larger. But there’s also benefits on the negotiating side with prices, merchandising and working with retailers,” Weissman said.

Conagra Chief Executive Officer Sean Connolly told Reuters the deal would help the company cut down on supply chain costs and strengthen its relationship with retailers.

“We can do a better job of filling full truckloads when we ship to our customers and work more efficiently,” Connolly said, adding that the company will use the cash from cost savings to invest more in developing its brands.

The Conagra Brands logo. Conagra/via REUTERS


Chicago-based Conagra said the two packaged food companies would have reported a combined $11 billion in full-year proforma net sales, with $4.9 billion in frozen food sales. It expects to save about $215 million by the end of the fiscal year 2022.

Pinnacle shareholders would get $43.11 per share in cash and 0.6494 Conagra shares for each Pinnacle share, implying an offer price of about $68 a share.

Including debt, the deal is valued at $10.9 billion. It is expected to close by the end of calendar 2018.

The acquisition is a victory of sorts for Connolly, who had unsuccessfully tried to buy Pinnacle when he was CEO of Hillshire. The sale to Hillshire was canceled after Hillshire agreed to sell itself to Tyson Foods Inc (TSN.N) for $7.7 billion.

Talks between Conagra and Pinnacle, however, restarted after activist hedge fund Jana Partners LLC in April bought a 9.1 percent stake in New Jersey-based Pinnacle and urged the company to look for a sale.

Conagra stock slid 7 percent to $35.56 and Pinnacle fell 4.2 percent to $65.

Weissman said Conagra shares were likely down because the market was not thrilled with Conagra using shares for the deal. Also on Wednesday, the company reported mixed quarterly results, with better-than-expected sales but lower earnings than analysts had expected.

Stifel analyst Christopher Growe said the implied offer price was below the $75 per share he expected.

He said the offer was “a bit surprising,” citing other recent deals, such as General Mills Inc’s (GIS.N) purchase of Blue Buffalo, which have reached up to 19 times earnings before interest, taxes, depreciation and amortization.

Goldman Sachs and Centerview Partners are Conagra’s financial advisers, while Evercore and Credit Suisse are advising Pinnacle.

Reporting by Aishwarya Venugopal in Bengaluru and Richa Naidu in Chicago; Editing by Shailesh Kuber, Bernard Orr and Jeffrey Benkoe

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Lyft valued at $15 billion in latest funding round

(Reuters) – Lyft Inc said on Wednesday it raised $600 million in a new funding round led by Fidelity Management, doubling the ride-hailing firm’s valuation to $15.1 billion in little over a year.

An illuminated sign appears in a Lyft ride-hailing car in Los Angeles, California, U.S. September 21, 2017. REUTERS/Chris Helgren

The funding makes Fidelity one of Lyft’s largest investors with $800 million in investment. Lyft, which has 35 percent market share in the United States, has investors including AllianceBernstein, Baillie Gifford, and KKR Co (KKR.N).

Rival Uber in May said it would hold a secondary stock sale for employees and existing investors that would value the company at $62 billion, up from the $48 billion valuation it commanded in a secondary sale late last year.

Lyft operates in roughly the same number of U.S. cities as Uber, as well as in Toronto, Canada. Uber operates across the globe, although it has retreated from Southeast Asia, Russia and China after losing billions of dollars competing with local rivals.

Reporting by Munsif Vengattil and Vibhuti Sharma in Bengaluru; Editing by Arun Koyyur

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U.S. business spending on equipment cooling; trade gap narrowing

WASHINGTON (Reuters) – New orders for U.S.-made capital goods and shipments unexpectedly fell in May, but upward revisions to data for the prior month pointed to moderate growth in business spending on equipment in the second quarter.

FILE PHOTO: Caterpillar machines are seen at a construction site in New York City, U.S., October 17, 2016. REUTERS/Brendan McDermid

Other reports on Wednesday showed a sharp narrowing in the goods trade deficit last month, the latest indication that the economy was accelerating this quarter after losing some steam at the start of the year.

There are, however, fears that escalating tensions between the United States and its major trade partners, including China, Mexico, Canada and the European Union, could hurt business sentiment, disrupt supply chains and undercut economic growth.

“Factory managers are worried about the prospects of a full-blown trade war,” said Ilir Hysa, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “That said, the sentiment reflected in the manufacturing surveys is not rattled. But trade policy tensions are clearly a major hurdle.”

The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, slipped 0.2 percent last month. April data was revised to show the so-called core capital goods orders surging 2.3 percent instead of the previously reported 1.0 percent rise.

Economists polled by Reuters had forecast core capital goods orders gaining 0.5 percent last month. Orders increased 6.8 percent on a year-on-year basis.

FILE PHOTO: Containers are stacked on a ship at the Port in Bayonne, New Jersey during a work stoppage in the harbor of New York January 29, 2016. REUTERS/Brendan McDermid

Shipments of these goods dipped 0.1 percent last month after an upwardly revised 1.0 percent increase in April. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

They were previously reported to have gained 0.9 percent in April. The drop in core capital goods shipments last month did little to dampen expectations of robust GDP growth in the second quarter. Business spending on equipment increased at a 5.5 percent annualized rate in the first quarter and most economists expected a similar pace of growth in the April-June period.

In other data, the Commerce Department said the goods trade deficit declined 3.7 percent to $64.8 billion in May as an increase in exports outpaced a rise in imports. The department also said wholesale inventories increased 0.5 percent in May and stocks at retailers gained 0.4 percent.

The smaller goods trade deficit was seen offsetting an anticipated drag from inventory investment. Reports on the labor market and consumer spending have suggested that economic growth surged in the second quarter. Gross domestic product estimates for the April-June period are as high as a 5.3 percent rate. The economy grew at a 2.2 percent pace in the first quarter.


But housing continues to lag the strong economy, with reports on Wednesday showing contracts to buy previously owned homes falling again in May and applications for loans to purchase a home declining sharply last week. The housing market is being hobbled by land and labor shortages, leading to a dearth of houses available for sale.

The dollar firmed against a basket of currencies and prices for U.S. Treasuries rose. Stocks on Wall Street were trading higher.

The slowdown in business spending on equipment is despite the Trump administration’s $1.5 trillion income tax cut package, which came into effect in January. Some economists blamed the strengthening U.S. dollar and warned that the government’s protectionist trade policy could restrain business investment.

President Donald Trump has imposed tariffs on steel and aluminum imports to protect domestic industries from what he says is unfair foreign competition. Trump has also said he would press ahead with hefty tariffs on $50 billion of Chinese imports and threatened to impose a 20 percent duty on all imports of European Union-assembled cars.

China, Mexico, Canada and the European Union have retaliated in kind. Harley-Davidson Inc (HOG.N) said on Monday it would move production of motorcycles exported to the European Union from the United States to its international facilities and forecast the trading bloc’s retaliatory tariffs would cost the company $90 million to $100 million a year.

“Increasing trade protectionism could raise uncertainty and lower confidence, undermining the otherwise positive conditions,” said Greg Daco, chief U.S. economist at Oxford Economics in New York.

The decline in orders last month was almost broad. Orders for electrical equipment, appliances and components tumbled 1.5 percent, the biggest drop in six months. Orders for computers and electronic products fell 0.1 percent while those for fabricated metals decreased 1.2 percent.

There were also declines in orders for primary metals. But orders for machinery rose 0.3 percent, extending April’s 1.7 percent increase. Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, dropped 0.6 percent in May as demand for transportation equipment fell 1.0 percent. That followed a 1.0 percent decrease in durable goods orders in April.

Orders for motor vehicles and parts plunged 4.2 percent last month, the largest decline since January 2015.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

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