US core capital goods orders rebound; consumer confidence deteriorates amid tariff worries By Reuters

Written by Lucia Mutikani

WASHINGTON (Reuters) – New orders for key capital goods manufactured in the United States rose in November amid strong demand for machinery, providing more evidence that the economy is on solid footing as the year ends.

The report released by the Commerce Department on Monday, which also showed shipments of these goods increased for the second month in a row, came on the heels of strong consumer spending data last week.

The upbeat data underscores the economy’s resilience, which last week prompted the Federal Reserve to forecast smaller interest rate cuts in 2025.

“This strength is consistent with our view that growth in business spending on equipment will accelerate slowly next year,” said Michael Pearce, deputy chief US economist at Oxford Economics. “A rebound in orders and shipments of core capital goods could reflect some relief from policy uncertainty now that the election is over.”

Orders for non-defense capital goods, excluding aircraft, a closely watched proxy for corporate spending plans, rebounded

The Commerce Department’s Census Bureau said the growth rate rose 0.7% after falling 0.1% in October. Economists polled by Reuters had expected so-called core capital goods orders to rise by 0.1%.

Shipments of core capital goods rose 0.4% year-on-year. Shipments of core capital goods rose 0.5% after rising 0.4% in October. Business investment has largely held up despite the US central bank’s tight monetary policy tightening in 2022 and 2023 to curb inflation.

The Fed last week cut its benchmark overnight interest rate by 25 basis points to a range of 4.25%-4.50%. He expected interest rates to be reduced only twice in 2025, an indication of the continued flexibility of the economy and inflation, which remains high.

In September, Fed officials predicted interest rate cuts of a quarter of a percentage point next year. The shallow path of interest rate cuts in the latest forecasts also reflects uncertainty about the policies of the incoming Trump administration. The Federal Reserve Bank of Atlanta expects GDP to increase at a rate of 3.1% in the fourth quarter. The economy grew at a pace of 3.1% in the third quarter.

Machinery orders jumped 1.0% after rising 0.5% in October. Orders for electrical equipment, appliances and components rose 0.4% after rising 1.6% in October. There were also increases in primary metal orders.

But orders for computers and electronic products fell, as did orders for fabricated metal products.

Transportation equipment orders decreased by 2.9%. It was dragged down by a 7.0% decline in commercial aircraft orders. Boeing (NYSE:) reported on its website that it received 49 aircraft orders, down from 63 orders in October.

Commercial aircraft shipments fell further, likely affected by the seven-week strike at Boeing’s West Coast plants, which halted production of its best-selling 737 Max jets as well as the 767 and 777 wide-body jets. Boeing has also suffered from safety concerns.

Aircraft accounted for the strong increase in business spending on equipment in the third quarter.

While economists expected that a decline in aircraft orders would put pressure on business spending on equipment in the fourth quarter, the hit is likely to be limited by a strong rise in orders for core capital goods.

“Today’s numbers suggest that any overall decline in the fourth quarter may have been less profound than I previously thought, but the strike and associated production problems at Boeing are still likely to lead to a sharp decline in overall business investment in equipment in the fourth quarter.”, Stephen Stanley, Santander’s (BME:) Chief US Capital Markets Economist, said:

Durable goods orders, which range from toasters to airplanes that are meant to last three or more years, fell 1.1% after a 0.8% increase in October. The declines mostly reflect weak commercial aircraft orders.