December Sees Higher Than Expected Rise in US Core Capital Goods Orders
New orders for key US-manufactured capital goods rose more than anticipated in December, signaling firm business investment at the end of the year. Core capital goods orders increased 0.6 percent, following an upwardly revised 0.8 percent gain in November. Economists had expected a smaller 0.4 percent rise, underscoring persistent strength in the economy even as inflation and price trends continue to shape Federal Reserve expectations.
Shipments Point to Solid Fourth Quarter Growth
Shipments of core capital goods jumped 0.9 percent after a modest 0.2 percent increase in November. The strong shipment data suggests that business spending on equipment likely supported economic expansion in the fourth quarter. Analysts expect equipment investment to mark a fourth consecutive quarter of growth, with overall GDP projected to expand at a 3.0 percent annualized pace.
AI Investment Drives Business Spending
Much of the resilience in equipment spending has been linked to ongoing investment in artificial intelligence, particularly in data center development. Economists note that while AI-related sectors have led growth throughout the year, companies outside the technology space began increasing investment toward the end of 2025, potentially laying the groundwork for broader economic strength in 2026.
Manufacturing Sectors Show Mixed Trends
Orders across manufacturing categories were generally positive in December. Fabricated metal products rose 0.9 percent, electrical equipment and appliances gained 0.6 percent, and machinery orders edged up 0.3 percent. Orders for computers and electronic products surged 3.0 percent, while primary metals advanced 1.7 percent. However, trade tariffs have continued to weigh on manufacturing segments not directly tied to AI-driven demand.
Durable Goods Orders Decline on Aircraft Drop
Overall, durable goods orders fell 1.4 percent in December after a strong 5.4 percent increase in November. The decline was largely due to a sharp 24.9 percent drop in non-defense aircraft and parts orders, a typically volatile category. Transportation equipment orders decreased 5.3 percent following a significant rebound the previous month.
Motor Vehicles and Shipments Offer Support
Motor vehicle orders rebounded 1.2 percent, helping offset some broader weakness in transportation equipment. Meanwhile, total durable goods shipments rose 1.0 percent after slipping in November, indicating continued movement of goods despite fluctuations in new orders.
Housing Data Presents Mixed Picture
Separate data showed single-family housing starts increased 4.1 percent, suggesting steady residential construction activity. However, building permits declined 1.7 percent, pointing to some caution in future homebuilding plans.
Outlook for 2026 Remains Optimistic
Economists believe the combination of solid equipment investment, easing tariff uncertainty, and expected tax cuts could support stronger economic performance in 2026. The late-year pickup in capital spending is viewed as a positive signal for sustained growth momentum.
