New orders for key US-manufactured capital goods increased strongly in June while shipments surged by the most in 4-1/2 years as businesses ramped up spending on artificial intelligence, suggesting the economy maintained a fairly strong pace of growth in the second quarter.
The report from the Commerce Department on Monday also showed upward revisions to the data for May. The AI build-out is helping to limit the drag on the economy from the five-month war in the West Asia and the Trump administration's lingering tariffs on imports, propping up manufacturing.
The broad increase in the so-called core capital goods orders and shipments last month was powered by robust demand for computers and electronic products as well as electrical equipment, appliances and components.
"Equity markets are still wrestling with the valuations of many of these tech companies, but one thing is certain, and that is the capex expenditures of corporate America are keeping the economy afloat despite caution in other sectors engendered by the Middle East war uncertainty and higher energy prices," said Christopher Rupkey, chief economist at FWDBONDS.
Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.9 percent last month after an upwardly revised 1.9 percent increase in May, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast core capital goods orders would advance 0.8 percent after a previously reported 1.4 percent jump in May.
