A closely watched measure of business spending hit a six-year high in March, driven by a boom in artificial intelligence products and infrastructure.
New orders for non-defense capital goods, excluding aircraft, rose 3.3% in March, accelerating from a 1.6% increase in February, the Census Bureau said Wednesday (April 29).
According to multiple media reports, this indicator, called “core capital goods” by economists, is being watched as a barometer of business investment.
Reuters reported on Wednesday that the increase in core capital goods orders was stronger than expected. Economists polled by the news agency had predicted a 0.5% rise.
The report attributes the increase in corporate capital spending to a boom in investment in AI and data centers that support the technology.
He added that companies may be rushing to buy equipment before war with Iran causes price hikes and shortages.
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A Reuters report quoted Steven Stanley, chief US economist at Santander US Capital Markets, as saying: “The extraordinary strength of the month, when companies had good reason to be cautious, proves that policy-related uncertainty has saved significant energy in business development over the last year.”
Bloomberg reported on Wednesday that the increase in core capital goods orders in March was the largest since mid-2020.
The increase followed a year of “strong” capital spending, driven by corporate spending on AI, the report said.
Economists expect this trend to continue until the end of 2026, driven by spending on AI and the availability of more favorable tax provisions, according to a report by Bloomberg.
The report quoted Eliza Winger, an economist at Bloomberg Economics, as saying, “Business investment is on solid momentum going into the second quarter, buoyed by strength in AI-related spending. Geopolitical uncertainty is noteworthy, but the data does not yet point to a significant pullback in capital spending.”
On Thursday (April 23), it was reported that Meta plans to cut 10% of its workforce to offset investments in AI infrastructure. The company plans to spend $115 billion to $135 billion on data centers, chips and other AI infrastructure this year.
On April 20, it was announced that Anthropic has committed to spending more than $100 billion over the next 10 years on Amazon Web Services (AWS) technologies, including Trainium and Graviton hardware.
On April 1, it was reported that Meta, Google, and Amazon plan to spend tens of billions of dollars more than expected on data centers this year to meet demand for AI.
