Increase in Business Equipment Orders Signals Investment Growth
In August, orders for business equipment saw a significant rise, indicating a strengthening investment demand in the U.S. economy.
According to the Commerce Department, new orders for non-defense capital goods, excluding aircraft—an important gauge of business spending—rose by 1.6 percent to reach $87.6 billion. This surge was much higher than the 0.5 percent increase that economists were anticipating.
This increase followed a revised gain of 0.6 percent in July, which turned out to be three times larger than initially reported. When combined with June’s 1.7 percent growth, core capital goods orders have increased by about 3.9 percent over the last three months.
The ongoing gains suggest that there is a growing demand for equipment purchases, which may bolster manufacturing activity in the coming months. Businesses have been placing larger orders for various types of machinery, computers, and electrical equipment, maintaining an investment expansion that has already led to double-digit growth in core capital goods orders this year.
Up until August, total core capital goods orders reached $665.7 billion, a notable 10.6 percent increase compared to the same period in 2022.
Interestingly, while business equipment orders were strong, the overall durable goods orders—designed to last at least three years—remained flat. Total orders held steady at $338.6 billion because decreases in commercial aircraft and motor vehicles offset gains in other areas.
This total figure actually surpassed expectations, as analysts had predicted a decline of 0.4 percent. Additionally, the increase for July was adjusted downward from 1.1 percent to 0.9 percent.
Machinery orders grew by 1.1 percent in August, continuing the trend after increases of 1.5 percent in July and 1.3 percent in June. This sequential growth reflects approximately 4 percent growth over three months, signaling persistent demand for equipment used in various sectors like industrial, agricultural, and construction.
Orders for primary metals also saw an uptick of 1.2 percent, building on gains of 2.1 percent in July and 1.9 percent in June. Electrical equipment, appliances, and components experienced a 1.1 percent rise in August.
On the technology front, orders for computers and related products jumped 1.5 percent, recovering from a 0.6 percent decline in July, while communication equipment orders rose by 0.3 percent following a 1.8 percent gain in the previous month.
Year-to-date data reveals remarkable gains across multiple equipment categories. For instance, machinery orders are up 13 percent compared to the first eight months last year, while computer orders have surged by 20.1 percent. Orders for communications equipment have skyrocketed by 35.8 percent, and primary metals orders increased by 15.3 percent.
However, not all areas showed strength. Fabricated metal products orders decreased by 1.3 percent in August, while orders for motor vehicles and parts dipped by 0.6 percent. Commercial aircraft orders, known for their volatility and largely affected by Boeing’s airline orders, fell by 4.3 percent after a substantial 12 percent increase in July. Overall, transportation equipment orders experienced a 0.6 percent decline.
When transportation is excluded, durable goods orders still managed to increase by 0.3 percent, although this was below the anticipated 0.6 percent gain. Nonetheless, July’s performance for that broader measure was revised upward from 0.4 percent to 0.7 percent, which sets a stronger baseline for August.
Excluding transportation, durable goods orders rose by 9.6 percent during the first eight months of the year. Total durable goods orders overall showed a 7.7 percent increase in that timeframe, even as commercial aircraft orders plummeted by 22.1 percent.
It’s worth noting that these figures are adjusted for seasonal variations but not for inflation, so rising prices might account for part of the increase in order values. Still, the sharp rise in core capital goods orders in August—and the strong performance in July—suggests a steady momentum in business equipment investment.
