By Lucia Mutikani
WASHINGTON, Jan 26 (Reuters) – New orders for key U.S.-manufactured capital goods increased more than expected in November, indicating business spending on equipment maintained a steady growth pace in the fourth quarter.
The fifth straight monthly rise in the so-called core capital goods orders, reported by the Commerce Department on Monday, followed on the heels of data last week showing strong consumer spending in October and November, and reinforced economists’ expectations the economy extended its robust performance in the last three months of 2025.
The strength in business investment in equipment and the overall economy has occurred despite President Donald Trump’s sweeping import tariffs, which have depressed a large segment of manufacturing. But a few industries have received a lift from the protection against foreign competition. An artificial intelligence boom has supported the technology sector.
“Many companies put their investment plans on the shelf for a time last year, awaiting further clarity on policy, in particular with regard to tariffs,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “While uncertainty is far from eliminated, executives appear to have reached the point where they have enough information to move forward.”
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.7% after a downwardly revised 0.3% gain in October, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast core capital goods orders would increase 0.3% after a previously reported 0.5% advance in October.
The report was delayed by the 43-day shutdown of the federal government. Another shutdown is looming following a second fatal shooting by federal agents in Minneapolis over the weekend.
The top Democrat in the U.S. Senate, Chuck Schumer, said his party would vote against funding legislation that includes money for the Homeland Security Department that oversees ICE, the federal immigration agency. Congress faces a January 30 deadline to fund the government or risk a partial government shutdown.
Shipments of core capital goods rose 0.4% after gaining 0.8% in October. These shipments go into the calculation of the business spending on equipment component in the gross domestic product report. Non-defense capital goods orders rebounded 20.0% after dropping 4.0% in October. But shipments of these goods fell 2.0% after advancing 2.2% in October.
“This keeps our forecast for equipment investment to have expanded by 7.5% annualized last quarter on track,” said Bradley Saunders, a North America economist at Capital Economics.
Economists said the data did not change the outlook for U.S. monetary policy. The Federal Reserve is expected to leave interest rates unchanged after the end of a two-day meeting on Wednesday.
Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury yields were largely lower.
ECONOMISTS CAUTIOUSLY OPTIMISTIC ABOUT MANUFACTURING
Manufacturing, which accounts for 10.1% of the economy, has not experienced the renaissance the Trump administration had hoped for with the tariffs. Economists are cautiously optimistic of a broad improvement in manufacturing this year as the drag from import duties eases and tax legislation, which made bonus depreciation permanent among other perks, takes effect.
The Atlanta Fed is forecasting that gross domestic product increased at a 5.4% annualized rate in the fourth quarter, though estimates from big Wall Street banks, including Goldman Sachs, are running well below a 3.0% pace. Economists expect the recent government shutdown undercut GDP growth last quarter.
While most of the lost output will be recovered, economists estimated a winter storm that blanketed a large part of the country over the weekend could subtract as much as 1.5 percentage points from GDP growth this quarter, the bulk of it through lost consumer spending.
“Some output will be permanently lost due to winter storm Fern,” said Aditya Bhave, a senior U.S. economist at Bank of America Securities. “However, we wouldn’t expect any lasting impact on the trajectory of the economy. This means there is as much upside to second-quarter GDP growth as there is downside to first-quarter” GDP.
The economy grew at a 4.4% pace in the July-September quarter, boosted by consumer spending and a smaller trade deficit. Business investment in equipment expanded at a 5.2% rate in the third quarter, contributing to the fastest economic growth pace in three years.
Orders for fabricated metal products jumped 1.0% in November, while those for electrical equipment, appliances and components accelerated by 1.7%. Machinery orders rose 0.5%. Orders for computers and electronic products gained 0.2%.
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, rebounded 5.3% in November amid a surge in aircraft demand after declining 2.1% in October. Non-defense aircraft and parts orders soared 97.6%. Boeing reported on its website that it had received 164 aircraft orders in November compared to only 15 in October.
Motor vehicle orders slipped 0.5% after easing 0.1% in October. Demand has slowed following a rush by buyers to place orders ahead of the September 30 expiration of tax credits for battery-powered electric vehicles. There were also decreases in orders for defense aircraft and parts.
Orders for transportation equipment increased 14.7% after slumping 6.3% in October. Overall durable goods shipments fell 0.2% in November after rising 0.5% in the prior month.
“A more supportive fiscal policy environment and a less restrictive monetary policy backdrop together ought to be fertile ground for capital spending to show growth in 2026,” said Shannon Grein, an economist at Wells Fargo.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)
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