Orders for core business equipment posted their largest monthly increase since the summer of 2020, the Commerce Department reported Wednesday, driven by surging demand for computers and electronic products as companies continue to pour money into artificial intelligence.
The value of orders for nondefense capital goods excluding aircraft — the closely watched proxy for business spending on equipment — jumped 3.3 percent in March, far exceeding the 0.5 percent gain economists had forecast. February’s figure was revised sharply higher, to a 1.6 percent advance from the initially reported 0.6 percent, meaning businesses have now ramped up capital spending in back-to-back months at a pace not seen since the post-pandemic rebound.
The computers and electronic products category — which includes the servers, networking gear, and processing equipment that form the backbone of AI infrastructure — rose 3.7 percent to $29.6 billion, gaining in eleven of the last twelve months.
The gains were broadly based across equipment categories. Orders for machinery rose 0.8 percent to $41.8 billion. Electrical equipment advanced 0.8 percent to $18.3 billion. Primary metals ticked up 0.4 percent to $28.8 billion. Motor vehicle orders jumped 1.2 percent.
Headline durable goods orders, which include commercial aircraft and defense equipment, rose 0.8 percent to $318.9 billion, beating the consensus forecast of 0.5 percent and snapping a three-month streak of declines. Excluding transportation, orders gained 0.9 percent, also surpassing expectations of 0.4 percent.
Defense capital goods orders surged 18.0 percent to $19.5 billion, reflecting the ongoing military buildup tied to the conflict with Iran. Excluding defense, orders actually slipped 0.3 percent, underscoring how much of the headline strength outside of business investment came from military procurement rather than broader industrial demand.
Shipments of core capital goods, which feed directly into the equipment investment component of gross domestic product, rose 1.2 percent after an upwardly revised 1.3 percent advance in February. That two-month run of strong shipments suggests the equipment spending component of first-quarter GDP will come in solid when the Bureau of Economic Analysis reports its advance estimate.
The report paints a picture of an economy where business investment continues to defy the anxiety that has settled over financial markets since the Iran conflict drove up oil prices and rattled global shipping lanes. Companies appear to be betting that the productive returns from AI-related capital spending outweigh the near-term uncertainties, a calculation that has so far been borne out by the steady upward march in orders for technology equipment over the past year.
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