AI spending is hot, geopolitical tensions add fuel! U.S. core capital goods orders increase by 0.9% in June, shipments see largest gain in over four years

According to Zhitong Finance APP, growth in U.S. enterprise equipment orders in June exceeded market expectations, marking a strong finish for capital expenditures in the first half of the year. Data released by the U.S. Department of Commerce on Monday showed that core capital goods orders (excluding aircraft and military equipment), considered a proxy for business equipment investment, rose 0.9% month-on-month in June, with May’s figure revised up to a 1.9% gain. Total durable goods orders for items with a minimum service life of three years—including commercial aircraft and military equipment—rose by just 0.3% for the month, falling short of expectations.

Since the beginning of this year, U.S. business investment has remained robust, driven by AI-related expenditures and a surge in defense orders amid heightened geopolitical tensions. These factors are expected to continue supporting investment growth in the coming months.

The durable goods orders report showed increases in orders for computers, communications, and electrical equipment, with primary metal products also recording growth.

U.S. tech giants—Alphabet Inc. (GOOGL.US), Meta Platforms Inc. (META.US), Microsoft (MSFT.US), and Amazon (AMZN.US)—announced in April that they plan to invest up to $725 billion in AI this year.

Looking ahead, a new round of tariff policy from U.S. President Trump, combined with ongoing tensions in the Middle East, is adding uncertainty to business operations, a situation that could not only drive up prices but also dampen some investment plans.

Commercial aircraft orders, which tend to fluctuate significantly month-to-month, jumped 3.7% in June after a steep decline in May. Boeing (BA.US) reported receiving orders for 121 planes in June, far surpassing the 27 orders recorded in May.

Shipment Data

Government reports indicate that shipments of core capital goods (excluding aircraft and military equipment—a less volatile indicator) rose 1.9% month-on-month in June, posting the largest single-month gain since late 2021.

Over the past three months, the annualized rate of shipments for these goods increased by 11.1%, accelerating compared with the first quarter.

Economists will further revise their forecasts for the second-quarter GDP, set to be released Thursday, based on Monday’s data. Prior to the durable goods report, the Atlanta Fed’s GDPNow model projected that equipment spending would contribute about 0.88 percentage points to second-quarter GDP—the largest boost in over a year.

Stephen Stanley, Chief U.S. Economist at Santander US Capital Markets, said in a report: “Overall, business investment spending remains strong.” He added that in the second quarter, “equipment spending is likely to once again be the strongest component of final demand.”