US core capital goods orders rebound sharply in May

• The rebound was stronger than the 0.6% increase economists had forecast, with gains driven partly by higher prices for memory chips and AI-related equipment investment
• Business equipment spending posted double-digit growth in Q1, and GDP estimates for Q2 are as high as 3.0% annualized, up from 2.1% in the first quarter
• Overall durable goods orders fell 4.5% in May due to a 51.8% plunge in non-defense aircraft orders, with Boeing reporting only 27 aircraft orders compared to 136 in April

US Core Capital Goods Orders Rebound Sharply in May

Key Figures:

U.S. core capital goods orders (non-defense excluding aircraft) increased 1.6% in May, significantly exceeding the 0.6% forecast and rebounding from an upwardly revised 0.7% decline in April. This closely watched indicator of business spending suggests continued economic strength in Q2 2026.

Market Performance:

Core capital goods shipments rose 0.3% in May following a 0.5% April increase. However, overall durable goods orders fell 4.5% after April's 8.5% surge, primarily due to a 51.8% plunge in non-defense aircraft orders. Boeing received only 27 aircraft orders in May compared to 136 in April.

Sector Highlights:

• Computers and electronic products orders: +0.3%
• Electrical equipment and components: +0.3%
• Strong gains in fabricated metals, primary metals, and machinery
• AI-driven demand for information processing equipment remains robust

Economic Context:

Business equipment spending recorded double-digit growth in Q1 2026, and GDP estimates for Q2 currently reach as high as 3.0% annualized, up from 2.1% in Q1. The report suggests equipment investment will again support economic expansion.

Market Factors:

Analysts note some of May's increase reflects higher prices, particularly for memory chips, as businesses accelerate AI infrastructure investments. However, manufacturing faces headwinds from the U.S.-Israeli war with Iran, which has disrupted supply chains and elevated commodity prices including oil and aluminum.

Implications:

The robust rebound in core capital goods orders indicates sustained business confidence and investment appetite despite geopolitical challenges, supporting positive economic growth projections for mid-2026.