Equipment spending grew robustly in the first month of 2025, but it’s unclear whether that signals underlying economic strength or business owners bracing for tariffs.
Core capital goods, a proxy for private business equipment spending, rose a solid 0.8% in the month of January following a downwardly revised increase of 0.2% in December, according to the U.S. Census Bureau’s monthly advance report, released on Feb. 27. Excluding transportation, a sector prone to volatility, orders for durable goods held steady from December to January. A steep uptick in aircraft manufacturing orders drove a 3.1% increase in durable goods orders.
Robust growth in capital goods orders is typically an indicator of a strong economy, but it’s hard to say whether the 0.8% increase reflects true confidence in the manufacturing sector or a temporary scramble by companies to secure equipment ahead of tariffs.
If the latter is true, it was a bet that paid off: Following the report’s release, President Donald Trump imposed 25% levies on Canadian and Mexican goods — a move that will disrupt domestic manufacturing, which relies on imports of raw materials and intermediary goods.
“You’re seeing equipment spending perk up a little bit in these first few months of the year,” says Nicole Cervi, an economist at Wells Fargo. “That likely is tied to some businesses putting in their orders now, and getting those through the pipeline before tariff uncertainty really starts to take hold.”
Non-defense aircraft orders jumped 94% in January, returning to a more normal level after a difficult fourth quarter for Boeing marked by strikes. But one month of growth isn’t enough to draw long-term conclusions about the turbulent aircraft sector.
“Boeing has had quality problems, delivery problems and big cancellations from time to time, and it’s causing tremendous volatility in their numbers,” says Christopher Low, chief economist at FNH Financial. “It’s a pattern we’ve seen stretching back the last couple of years.”
New orders for motor vehicles and parts experienced its fourth consecutive monthly decline, though that trend may reverse soon as manufacturers and consumers brace for tariff-related price increases. Meanwhile, orders of computers and electronic products grew 1.7%, a sign of continued investment in artificial intelligence.
The robust increase in core capital goods orders, which excludes aircraft and defense spending, was not mirrored by shipments, which fell slightly between December and January after a 0.3% increase between November and December. Those shipments are part of the calculation of business spending on equipment, a component of gross domestic product, which means that they will take away from GDP for January.
It may take time for equipment shipments to match the pace of orders.
“We don’t see the drop in shipments as particularly concerning,” says Tuan Nguyen, an economist at RSM US LLP. “Because companies have been pulling forward their orders after the election in anticipation of higher tariffs, shipments and existing inventories have not been able to catch up.”
Under more stable circumstances, the increase in business equipment spending in January would undoubtedly signal a strong economy, but Trump’s on-again, off-again relationship with tariffs complicates that picture. As steep tariffs on Mexico and Canada — the country’s two largest trading partners — take effect, time will tell whether they deter companies from making investments.
“What we’re seeing is a great deal of uncertainty in the near term,” says Low. “The obvious source of that is the turmoil coming from Washington.”