US durable goods orders surge 7.9% as core capex drops 1.1%

Aircraft orders propelled the headline beat, while a 1.1% decline in core capital goods raised concerns about business investment.

US durable goods orders surged 7.9% in April, more than double the 4% consensus estimate, though a drop in core capital goods orders signaled weakening business investment.

The Commerce Department data, released Thursday, showed the headline gain was the largest since a 9.9% jump in July 2024. Excluding transportation, orders rose 1.1%, beating the 0.5% estimate. But non-defense capital goods orders excluding aircraft — the proxy for business equipment spending — fell 1.1%, missing the 0.4% gain economists had forecast.

The prior month's headline reading was revised to 0.8%. The core capital goods figure followed a 3.9% gain in March, making the April reversal more pronounced. Treasury yields initially rose 5 basis points on the headline beat, with the 10-year reaching 4.38%, before settling at 4.35% as traders digested the capex weakness. The S&P 500 traded little changed.

The mixed data complicates the Federal Reserve's policy path. A strong headline suggests economic resilience that could keep rates higher for longer, while the capex weakness signals corporate caution that may weigh on growth. The last time core capital goods orders posted a similar decline — a 1.5% drop in October 2025 — the Fed held rates steady at its subsequent meeting, citing uncertainty in business investment.

The divergence between consumer-driven demand and business investment has been a recurring theme in recent economic data. Durable goods orders, which measure orders for items designed to last at least three years, are a volatile series heavily influenced by large-ticket items such as aircraft and defense equipment. Transportation equipment led the April surge, though the Commerce Department did not immediately disclose the full aircraft breakdown. The ex-transport reading of 1.1% provides a cleaner view of underlying manufacturing demand and suggests the factory sector is holding up better than the headline volatility implies.

Core Capex Signals Caution

The 1.1% decline in non-defense capital goods orders excluding aircraft marks the first negative reading in three months. The prior month's 3.9% gain had raised hopes that business investment was gaining momentum after a sluggish start to the year, when the metric averaged just 0.5% monthly growth in the first quarter.

The data comes as the Federal Reserve maintains its benchmark rate at 5.25% to 5.5%, where it has held since July 2023. Markets are pricing in a 62% probability of a hold at the June 17-18 meeting, according to CME FedWatch, with the first quarter-point cut fully priced for September. The mixed durable goods reading is unlikely to shift those odds significantly.

For policymakers, the April report offers little clarity. The headline beat supports the case for patience — the economy is not weakening fast enough to justify near-term cuts. But the capex miss reinforces concerns that elevated borrowing costs are beginning to constrain corporate spending, a dynamic that could eventually feed into weaker hiring and consumer demand.

The last time core capital goods orders fell more than 1% in a single month was October 2025, when a 1.5% decline preceded a period of below-trend GDP growth in the fourth quarter. If the April weakness persists, it could weigh on second-quarter GDP estimates, which the Atlanta Fed's GDPNow model currently tracks at 2.7%.

The next major data point will be the May consumer price index, due June 11, followed by the Fed's June rate decision on June 18.

This article is for informational purposes only and does not constitute investment advice.