Under the shadow of tariffs, companies are hitting the brakes on investments, and the growth rate of orders for U.S. capital goods is nearly stagnant.

In March, commercial equipment orders received by U.S. factories showed almost no growth, indicating that businesses are becoming increasingly cautious amidst uncertainty about tariffs and tax policies. Data released by the U.S. Commerce Department on Thursday showed that core capital goods orders (an alternative indicator of equipment investment excluding aircraft and military equipment) increased by 0.1% last month on top of a revised 0.3% decline in February. The pace of growth in shipments of core capital goods slowed down. Orders for all durable goods (goods that can be used for at least three years) surged by 9.2%, the largest increase since July, primarily due to a 139% increase in commercial aircraft orders. The slowdown in the growth of capital goods orders indicates that businesses have become more cautious about operational investments before President Trump announced comprehensive tariffs in early April. The unpredictable trade policies have exacerbated uncertainty, leading to difficulties in capital expenditure planning for businesses and concerns about economic prospects. While business leaders and investors are waiting for the completion of negotiations for several bilateral trade agreements by the government, lawmakers on Capitol Hill are still pushing for tax reduction legislation. Unlike cancellable orders, actual shipment data (reflecting completed transactions) is used when calculating GDP. The revised growth rate of core capital goods shipments slowed down from 0.7% to 0.3%. Economists pay more attention to core shipment data as it provides a more accurate reflection of actual sales conditions - commercial aircraft and military equipment often have very long lead times from order to delivery. Shipments of non-defense capital goods, including aircraft, plummeted by 1.9%, marking the largest decline since October last year, mainly due to commercial aircraft. This suggests that the initial GDP reading for the first quarter in the United States, which will be released next week, may show weakness. Prior to the durable goods report, the Atlanta Federal Reserve's GDPNow model predicted that business equipment spending would contribute 0.8 percentage points to economic growth this quarter, potentially reaching a new high since the end of 2020. However, the Commerce Department report shows that despite the significant increase in volatile commercial aircraft orders (Boeing received 192 orders in March, the highest since late 2023), China has requested airlines to suspend taking delivery of Boeing aircraft as the trade war escalates. Various manufacturing surveys suggest a bleak outlook. The S&P Global Manufacturing PMI for April has been close to the threshold of expansion for two consecutive months, while the Philadelphia Federal Reserve's manufacturing index plummeted by nearly 39 points this month, showing the most intense contraction in nearly two years. On the same day, data from the U.S. Department of Labor showed a slight increase in initial jobless claims, but they remain at low levels indicating a stable job market.