Tariffs hit corporate investment intentions, US core capital goods orders in April experienced the biggest decline in six months.

In April, the commercial equipment orders at US factories experienced the largest decline since October of last year, indicating a weakening of business investment sentiment amidst uncertainty over tariffs and tax policies. Data released by the US Commerce Department on Tuesday showed that core capital goods orders in April, which can better reflect equipment investment conditions and are less volatile as they are not affected by aircraft and military equipment, fell by 1.3% from the previous month. The March figure was also revised up to 0.3%. The shipments of core capital goods decreased by 0.1%, marking the first decline since October of last year. Orders for all durable goods (items with a lifespan of at least three years) dropped by 6.3%, mainly due to a decrease in commercial aircraft orders. Additionally, orders for automobiles, electrical equipment and appliances, communication equipment, and primary metals also declined last month. The report emphasized the caution that businesses should exercise when evaluating demand prospects and noted that companies are focusing on cost-cutting under the influence of President Trump's trade policies. Furthermore, companies are awaiting clear conclusions on tax legislation being discussed in the US Congress. Since orders can be cancelled, the government uses freight transportation data as a reference factor in calculating Gross Domestic Product (GDP) as these data can reflect the specific timing of payments. After a 1% decrease in March, the transportation volume of capital goods (including national defense equipment and commercial aircraft) increased by 3.2% this month. Prior to the durable goods report release, the Atlanta Fed's GDPNow forecast indicated that business equipment spending in the second quarter would contribute nearly 0.4 percentage points to US economic growth. Equipment investment in the first quarter contributed over 1 percentage point to GDP, the highest since 2020, mainly due to the development of aircraft manufacturing. The report from the US Commerce Department showed that after a slight increase in April, commercial aircraft bookings (which fluctuate significantly each month) decreased by 51.5%. Boeing Company (BA.US) reported receiving only 8 orders in April, the lowest since May of 2024, compared to 192 orders in March, the highest since 2023. Aircraft orders experience large fluctuations, and the government's published data does not always align completely with the numbers released monthly by aircraft manufacturers.