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US Core Factory Orders Rise, Signaling Firmer Business Investment
Despite a decline in the headline factory orders measure, there was resilience in underlying capital goods demand, a proxy for business equipment investment.
A closely watched gauge of U.S. business investment rose in July even as overall factory orders fell, suggesting steadier momentum in the United States’ industrial sector.
Non-defense capital goods orders excluding aircraft—a key proxy for business investment in equipment—climbed by 1.1 percent in July, according to a U.S. Census Bureau report published on Sept. 3.
The gain followed June’s 0.6 percent decline and indicates that companies are stepping up purchases of machinery, computers, and other long-lived equipment tied to productivity and capital expenditure. Shipments in the same category, which feed directly into the gross domestic product’s equipment spending measure, increased by 0.7 percent in July, building on a 0.4 percent gain in June.
By contrast, overall new orders for manufactured goods decreased by 1.3 percent to $603.6 billion in July. While a decline, the new orders figure was a marked improvement from the 4.8 percent drop recorded in June. Orders have now fallen in three of the past four months.
The headline figure is often distorted by volatile aircraft contracts, which is why economists often focus on the ex-aircraft category for a clearer read on business spending plans.
Other parts of the report also pointed to resilience. Shipments rose by 0.9 percent, marking a third straight monthly gain, while inventories increased by 0.3 percent, the ninth rise in 10 months.
The inventories-to-shipments ratio edged down to 1.56 from 1.57, a sign that stockpiles are being replenished in step with demand rather than piling up unsold, a healthier backdrop for manufacturers.
The factory orders report aligns with other recent data signaling a revival in U.S. capital expenditures. Treasury officials have described 2025 as a “CapEx Comeback,” pointing to double-digit gains in business investment.
Capital expenditures increased at an annualized rate of 11 percent in the second quarter, following a 23 percent surge in the first quarter. Taken together, the first half of 2025 marked the strongest back-to-back increase in nearly three decades, according to Treasury Secretary Scott Bessent.
Bessent said in a July 22 post to X that the jump in investment shows “a major investment wave underway,” crediting the One Big Beautiful Bill Act’s tax incentives. The legislation features 100 percent bonus depreciation, retroactive expensing to the start of President Donald Trump’s second term, and immediate deductions for research and development costs.
Citi analysts, writing in a July 17 research note, said U.S. tax law could enhance capital expenditure in the medium-term, pointing to defense, manufacturing, and robotics.
“The combination of tariff pressure and incentives such as permanent full expensing of equipment, research and development, and factory building may lead to on-shoring of industrial production in the coming years,” they said.
S&P Global said this week that U.S. manufacturing activity expanded at its strongest pace in more than three years in August, with its purchasing managers’ index rising to 53, the highest since May 2022.
“US manufacturing was running hot over the summer,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. “The past three months have seen the strongest expansion of production since the first half of 2022, with the upturn gathering pace in August amid rising sales.”
Firms reported a jump in new orders and stepped up hiring to keep pace. Inventories rose further as companies built stockpiles against potential supply constraints and tariff-related cost pressures. Input price inflation also accelerated, although Williamson said producers were largely able to pass higher costs along to clients.
Trump administration officials have said that broader price pressures remain contained. A recent White House Council of Economic Advisers note highlighted that U.S. core goods inflation has been modest by international standards. Core goods prices rose by just 1.2 percent in the 12 months through July, or by 1.1 percent at an annualized rate since January. That compares favorably with Canada and Mexico, where goods inflation has been steeper, and is roughly in line with the UK and the European Union.
Taken together, the data suggest that the U.S. industrial sector is regaining momentum without igniting runaway price pressures.
Tom Ozimek is a senior reporter for The Epoch Times. He has a broad background in journalism, deposit insurance, marketing and communications, and adult education.
