US core capital goods orders jump sharply in May

• Core capital goods orders jumped 1.6% in May versus a 0.6% forecast, with strong gains in computers, electronics, fabricated metals, and machinery driven partly by AI investment in information processing equipment
• Overall durable goods orders fell 4.5% due to a 51.8% plunge in non-defense aircraft orders, as Boeing reported only 27 aircraft orders in May compared to 136 in April
• Business equipment spending showed double-digit growth in Q1, and second-quarter GDP estimates now reach 3.0% annualized versus 2.1% in the first quarter

Summary: US Core Capital Goods Orders Jump Sharply in May

Key Figures:

U.S. core capital goods orders (non-defense excluding aircraft) surged 1.6% in May, significantly exceeding the 0.6% forecast and reversing April's revised 0.7% decline. Core capital goods shipments increased 0.3%, following a 0.5% gain in April. Overall durable goods orders fell 4.5% after April's 8.5% surge.

Main Drivers:

The strong rebound was driven by broad-based demand increases, particularly in:

• Computers and electronic products (+0.3%)
• Electrical equipment and components (+0.3%)
• Fabricated metal products, primary metals, and machinery (substantial gains)

Business investment in artificial intelligence is fueling demand for information processing equipment and memory chips, with some price inflation contributing to the order increase.

Market Context:

Business equipment spending recorded double-digit growth in Q1, and the strong May data suggests equipment investment will continue supporting economic growth in Q2. GDP estimates for Q2 currently reach as high as 3.0% annualized, up from 2.1% in Q1.

Headwinds:

Manufacturing faces challenges from a U.S.-Israeli conflict with Iran, disrupting supply chains and raising commodity prices for oil and aluminum. Boeing's aircraft orders plummeted 51.8% (27 orders vs. 136 in April), dragging down overall durable goods figures.

Implications:

The robust core capital goods data indicates resilient business confidence and capital investment despite geopolitical tensions, supporting expectations for continued economic expansion in the second quarter. The AI investment boom appears to be offsetting manufacturing sector pressures.