US business spending on equipment softened in April, with core capital goods orders declining 1.3% and shipments of these goods falling 0.1%. This decline is attributed to the ongoing uncertainty surrounding tariffs imposed by President Donald Trump, which has been causing businesses to postpone their capital projects until they have more clarity on policy.
Economists, including Stephen Stanley at Santander U.S. Capital Markets, predicted that business investment would be a key driver of a softer economic performance this year, and the latest data confirm this hypothesis. The decline in core capital goods orders and shipments is a significant drop since last October.
Despite some front-loading of spending on equipment by businesses to avoid higher prices from tariffs, economists expect investment growth to slow sharply later this year. Thomas Ryan at Capital Economics said that business equipment investment will flatline in the second half of the year unless companies maintain their first quarter’s robust pace of front-running imports.
The uncertainty surrounding tariffs also affects consumer confidence, with the Conference Board’s consumer confidence index increasing 12.3 points to 98.0 in May, beating economists’ expectations. However, concerns about the labor market and rising mortgage rates are still lingering, with house prices expected to slow down due to a rise in supply.
The latest data from the Commerce Department and other reports suggest that business spending on equipment will remain cautious until there is more clarity on policy regarding tariffs. As such, investors should expect volatility in business spending, with economists anticipating a period of front-loading and then a sharp slowdown later this year.
Source: https://www.reuters.com/business/aerospace-defense/us-core-capital-goods-orders-tumble-april-2025-05-27