New orders for key U.S.-manufactured capital goods increased strongly in June while shipments surged by the most in 4-1/2 years as businesses ramped up spending on artificial intelligence, suggesting the economy maintained a fairly strong pace of growth in the second quarter. The report from the Commerce Department on Monday also showed upward revisions to the data for May. The AI build-out is helping to limit the drag on the economy from the five-month war in the Middle East and the Trump administration’s lingering tariffs on imports, propping up manufacturing.
The broad increase in the so-called core capital goods orders and shipments last month was powered by robust demand for computers and electronic products as well as electrical equipment, appliances and components. “Equity markets are still wrestling with the valuations of many of these tech companies, but one thing is certain, and that is the capex expenditures of corporate America are keeping the economy afloat despite caution in other sectors engendered by the Middle East war uncertainty and higher energy prices,” said Christopher Rupkey, chief economist at FWDBONDS. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.9% last month after an upwardly revised 1.9% increase in May, the Commerce Department’s Census Bureau said.
Economists polled by Reuters had forecast core capital goods orders would advance 0.8% after a previously reported 1.4% jump in May. Core capital goods orders rose 9.3% year-on-year in June. Orders for computers and electronic products soared 3.1% after rebounding by 1.2% in May.
Electrical equipment, appliances and components orders rose 0.9% after climbing 0.2% in May. Orders for primary metals advanced 1.1%, but bookings for fabricated metal products fell 0.5%. Shipments of core capital goods, which go into the calculation of the business spending on equipment component in the gross domestic product report, surged 1.9% last month after gaining 0.2% in May.
The largest advance in shipments since December 2021 was led by computers and electronic products, and machinery. There were solid increases in the shipments of electrical equipment, appliances and components as well as primary metals. Nondefense capital goods orders increased 1.2% and shipments of these goods rose 1.5%.
Summary from source