US Business Investment Remains Strong

US orders for core capital goods increased in September, while shipments accelerated, indicating that business equipment spending maintained strong momentum during the third quarter. The latest Commerce Department report reinforces expectations that the US economy recorded solid growth during the July–September period, supported in part by investment in artificial intelligence infrastructure.

Non-defense capital goods orders excluding aircraft, a closely watched indicator of business investment, rose 0.5% in September following a 1.6% increase in August. The monthly gain fell short of economists’ expectations for a 0.7% increase. Nevertheless, core orders were up 10.9% year over year.

Shipments of core capital goods, which contribute directly to the equipment investment component of gross domestic product, increased 1.2% after rising 0.6% in August. Shipments were 8.8% higher than a year earlier, highlighting the continued strength of business equipment demand.

Equipment Spending Supports Third-Quarter Growth

Broader capital goods activity also strengthened. Overall non-defense capital goods orders advanced 6.2% in September, while shipments increased 1.7%.

Economists estimated that business spending on equipment grew at an annualized rate of approximately 20% during the third quarter. If realized, this would represent a third consecutive quarter of double-digit growth. Forecasts also pointed to US economic growth exceeding a 3% annualized rate for the quarter, ahead of the government’s advance GDP estimate scheduled for Thursday.

The investment cycle has helped support manufacturing and broader economic activity despite disruptions associated with the Middle East conflict. Supply chain pressures and higher commodity and energy prices have created additional challenges, but strong equipment spending has provided an important source of economic support.

AI Infrastructure Spending Raises Financial Questions

Artificial intelligence investment remains a major driver of capital expenditure, as technology companies commit substantial resources to computing infrastructure and related equipment. However, the scale of these investments is increasingly attracting scrutiny as investors question whether future returns will justify the cost.

Technology companies have borrowed heavily to finance AI-related expansion over the past year. If financing costs remain elevated or expected returns fail to materialize, companies could become more cautious about future investment commitments, potentially slowing equipment spending.

Economists also expect the boost from tax incentives introduced the previous year to diminish in 2027. Meanwhile, rising inflation associated with the US-Israeli war with Iran and tighter financial conditions could weigh on business investment.

Oliver Allen, senior US economist at Pantheon Macroeconomics, noted that surveys of capital expenditure intentions point toward a possible loss of momentum in core equipment investment, particularly if borrowing costs remain elevated.

Durable Goods Orders Record Broad Gains

Orders for durable goods, which are designed to last at least three years, increased 1.8% in September after rising 0.1% in August. Orders were up 8.0% year over year.

Transportation equipment provided a significant boost, with orders climbing 4.6% during the month. Orders for motor vehicles and parts increased 0.3%, while civilian aircraft orders surged 28.4%.

Boeing reported receiving 165 aircraft orders in September, compared with just 15 in August. The increase contributed to the strength of the transportation equipment category, although aircraft orders can be volatile and may produce substantial monthly fluctuations in headline durable goods figures.

What Investors Should Watch Next

The upcoming US GDP estimate will provide a broader assessment of how equipment spending contributed to economic growth during the third quarter. Investors will also be watching the Federal Reserve’s policy decision and guidance as inflation concerns and higher borrowing costs complicate the outlook for capital expenditure.

The sustainability of AI-related investment will remain a central consideration. Continued demand for computing infrastructure could support manufacturing and economic activity, but persistent financing pressures may eventually slow spending. The balance between strong current investment and the financial capacity to maintain it will help shape the outlook for US growth into 2027.