Orders for US business equipment rise by most in over a year

Orders placed with US factories for business equipment rebounded in November, posting the strongest monthly advance in over a year.

The value of core capital goods orders, a proxy for investment in equipment excluding aircraft and military hardware, increased 0.7% last month after a revised 0.1% decline in October, government figures showed Monday. The November gain was much stronger than the 0.1% gain anticipated by economists. The data aren’t adjusted for inflation.

Bookings for all durable goods — items meant to last at least three years — dropped 1.1% on fewer orders for commercial aircraft and a decline in defense spending. Excluding transportation equipment, orders decreased 0.1%.

The advance in orders may be just the beginning as companies are more comfortable making long-term investments now that the election has passed. Demand for big-ticket items may also be getting a boost from buyers looking to get ahead of higher prices that may result from new tariffs when Donald Trump takes office.

The report showed strength in orders for machinery, computers and primary metals.

Another sign of optimism came earlier this month when a gauge of new orders moved into expansion territory for the first time in eight months, according to the Institute for Supply Management’s November manufacturing survey.

What Bloomberg Economics Says…

“While the month’s data likely didn’t yet reflect the surge in sentiment after the Nov. 5 presidential election, there’s a good chance capex will gain ahead. Businesses are more optimistic on expectations for the economy to improve under the incoming Trump administration.”

– Eliza Winger

However, high borrowing costs — which have kept the sector in a downturn for the past two years — may stay elevated for some time. Last week, updated projections from the Federal Reserve showed fewer interest-rate cuts in 2025, with policymakers firmly set on quashing inflation.

Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, gained 0.5% after rising 0.4% in October. Before the report, the Atlanta Fed’s GDPNow forecast penciled in a 2% decline in business equipment spending for the fourth quarter.

Separate data out last week showed the US economy expanded at a faster pace in the third quarter than previously estimated, due in part to stronger equipment spending.

Monday’s report — produced by the Census Bureau — showed the level of bookings for commercial aircraft, which are volatile from month to month, fell 7% after surging in the prior month.

Boeing Co. reported 49 orders in November, down from 63 in October. Despite the drop, the company’s commercial aircraft deliveries are showing signs of stabilizing after one of the most tumultuous periods in the company’s history.

While often helpful to compare the two, aircraft orders are volatile and the government data don’t always correlate with the planemaker’s monthly figures.

The report, along with another on new-home sales, was originally scheduled for release Tuesday, but both were moved up a day by the Census Bureau following President Joe Biden’s executive order excusing federal-government workers from duty on Dec. 24.

— By Molly Smith (Bloomberg)