US orders for business equipment increased in July by more than projected, suggesting companies are moving forward on investment plans as uncertainty around trade and tax policy gradually diminishes.
The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, increased 1.1% last month after a revised 0.6% decrease in June, Commerce Department figures showed Tuesday. The gain exceeded all forecasts in a Bloomberg survey of economists.
Bookings for all durable goods — items meant to last at least three years and including orders for commercial aircraft and military equipment — fell 2.8%. Earlier this month, Boeing Co reported fewer orders in July than in June.
Despite the gain, economists expect business investment to be soft for the remainder of the year before picking up in 2026 as companies take advantage of tax provisions after President Donald Trump signed the One Big Beautiful Bill. In the first half of this year, companies were largely cautious about capital spending because of erratic tariff announcements and concerns about demand.
In addition to a Boeing-related surge in business investment in the first quarter, companies ramped up spending on equipment to speed the use of artificial intelligence. AI and similar capital expenditures have the potential of boosting productivity for companies aiming to offset higher costs, including import duties.
The durables report showed orders for electrical equipment, computers, machinery and metals increased last month. Bookings for motor vehicles also picked up.
Non-defence capital goods shipments including aircraft, which feed directly into the equipment investment portion of the gross domestic product report, rose 3.3%. Rather than orders, which can be cancelled, the government uses data on shipments as an input to GDP.
The government’s report showed core capital goods shipments, a less volatile metric that excludes planes and military hardware, rose 0.7% after an upwardly revised gain in the previous month.
Economists prefer the core equipment shipments figure to gauge underlying capital investment since there are extremely long times between ordering aircraft and military hardware and the actual shipment taking place.
Before the durables report, the Atlanta Fed’s GDPNow forecast anticipated a marginal increase in business equipment outlays for the third quarter. Spending on equipment contributed 0.26 percentage point in the second quarter and 1.11 points in the first.
The Commerce Department’s report showed bookings for commercial aircraft, which are volatile from month to month, declined for a second month following a massive increase in May. Boeing said it received 31 orders last month, down from 116 in June and 303 in May.
Source: theedgemalaysia