U.S. Business Spending on Equipment Softening as Tariff Uncertainty Persists

• New orders for key U.S.-manufactured capital goods plunged by the most in six months in April amid mounting uncertainty over the economy due to tariffs, suggesting business spending on equipment weakened at the start of the second quarter.
• The report from the Commerce Department on Tuesday, May 27, 2025, also showed shipments of these goods falling last month. Economists said President Donald Trump's flip-flopping on import duties was making it difficult for businesses to plan ahead. That has been evident in the deterioration in sentiment among businesses.
• Non-defense capital goods orders, excluding aircraft, a closely watched proxy for business spending plans, tumbled 1.3% last month. That was the largest drop since last October and followed an upwardly revised 0.3% gain in March, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast these so-called core capital goods orders dipping 0.1% after a previously reported 0.2% drop in March.
• However, front-running by businesses anxious to avoid the higher prices resulting from Trump's extensive tariffs on imports led to a significant increase in spending on equipment, particularly information processing equipment. This surge occurred at the fastest rate in four and a half years during the first quarter. That helped to limit the drag on gross domestic product from a flood of imports.
• Trump has delayed higher import duties on most countries until July. The White House this month announced a deal with Beijing to slash tariffs on Chinese goods to 30% from 145% for 90 days.
• The truce in the trade war between Washington and Beijing helped to lift consumer confidence in May to 12.3 points from 98.0 points after deteriorating for five straight months. Consumers, however, continued to worry about tariffs raising prices and hurting the economy.

(Source: Reuters)