U.S. Capital Goods Orders Fall in June While Shipments Rise Slightly
Orders for key U.S.-manufactured capital goods unexpectedly declined in June, signaling a slowdown in business investment in equipment during the second quarter. However, shipments of these goods continued to rise modestly, pointing to some ongoing activity despite growing uncertainty.
In the first quarter, business spending on equipment surged—driven in part by companies accelerating purchases to avoid higher costs tied to President Donald Trump’s broad tariffs on imports. This front-loading effect led to the fastest equipment spending growth since Q3 2020.
Although some of that demand has carried into the second quarter, many businesses are holding back on new capital expenditures. The reason: uncertainty surrounding how high tariffs might go.
“This weakness lines up with the wave of recent reports showing companies are postponing investment until there’s more clarity on tariffs and other policy shifts,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.
According to data from the Commerce Department, core capital goods orders—non-defense orders excluding aircraft—fell by 0.7% in June. This followed a revised 2.0% increase in May. Economists had expected a 0.2% rise.
Shipments of core capital goods, which contribute to GDP’s equipment spending measure, rose 0.4% in June after a 0.5% gain in May. These figures are not adjusted for inflation.
After factoring in inflation, economists say equipment investment slowed sharply in the second quarter. Some analysts even see a slight contraction following the 23.7% annualized growth seen in Q1.
“While nominal shipments have risen, the gains mostly reflect rising capital goods prices—not stronger demand,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. He added that despite tax breaks from the One Big Beautiful Bill, policy uncertainty continues to put capital spending on hold.
Business Sentiment Weakens Amid Trade Policy Concerns
The Congressional Budget Office (CBO) estimates that the One Big Beautiful Bill’s tax and spending package will add $3.4 trillion to the national debt but raise inflation-adjusted GDP by only 0.5% over a decade. Trump signed the bill into law earlier this month.
Adding to concerns, S&P Global’s latest flash manufacturing PMI showed contraction in July for the first time since December. S&P noted that any short-term benefits from tariffs are often outweighed by higher costs and inflation worries.
According to the Atlanta Federal Reserve, the economy is projected to rebound with 2.4% annualized growth in Q2. That follows a 0.5% GDP decline in Q1, largely due to shifting import flows. The government’s advance estimate for Q2 GDP is expected next week.
Durable Goods and Aircraft Orders Decline Sharply
Non-defense capital goods orders plummeted 24.0% in June after soaring 50.0% in May. Shipments in this category fell 0.9%, following a flat performance the previous month.
Overall durable goods orders—which include products designed to last at least three years—dropped 9.3% in June. This partially reversed the 16.5% jump in May. The decline was largely due to a steep drop in commercial aircraft bookings.
Aircraft orders fell 51.8% after skyrocketing 231.6% the month before. That May spike had been driven by a 150-plane deal between Qatar Airways and Boeing, announced during President Trump’s visit to the Gulf region.
Boeing reported receiving orders for 116 planes in June, down from 303 in May. The company may benefit further from ongoing trade negotiations led by the Trump administration.
“This could help keep aircraft orders steady, supporting production,” said Veronica Clark, an economist at Citigroup. “However, the impact will likely appear in exports rather than business investment.”
