Key insights
- US core capital goods orders unexpectedly declined in April, missing forecasts and signaling a potential slowdown in business investment despite a strong prior quarter. While AI spending provides a tailwind for specific sectors like information processing equipment, the broader decline suggests underlying economic pressures may be mounting. This could imply softer future demand and potentially impact corporate earnings and overall equity market sentiment.
WASHINGTON, May 28 (Reuters) - New orders for key U.S.-manufactured capital goods unexpectedly fell in April after hefty gains in the prior months, but demand remains underpinned by an artificial intelligence spending boom.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, dropped 1.1% last month after an upwardly revised 3.9% jump in March, the Commerce Department’s Census Bureau said on Thursday.
Economists polled by Reuters had forecast these so-called core capital goods orders would rise 0.4% after a previously reported 3.4% surge in March. Core capital goods orders also soared in February, helping business spending on equipment to post double-digit growth in the first quarter.
Businesses are ramping up AI investment, fueling demand for information processing equipment and other related products.
That trend is helping to prop up manufacturing and limit the hit from supply chains that have been snarled by the U.S.-backed war with Iran, and the accompanying price surges for commodities like oil and aluminum. Some parts of manufacturing are still dealing with the effects of import tariffs.
Orders for computers and electronic products fell 0.7%. But there were increases in orders for electrical equipment, appliances and components as well as machinery, primary metals and fabricated metal products. Core capital goods shipments rose 0.4% in April after increasing 1.3% in March.
Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, shot up 7.9% last month after advancing 1.3% in March.
They were lifted by a 165.9% jump in non-defense aircraft and parts orders. Boeing reported on its website that it had received 136 orders in April, most of them for more expensive models. That number compared to 33 orders in March.
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