New orders for core business capital goods, which is a proxy for private investment spending on goods that typically last more than three years, fell by 0.3% in February.
The slowdown, reported by the Commerce Department on Wednesday, was somewhat expected after three months of robust growth since the election in November.
While the top-line figure suggested a slowdown, most of the key categories that will be subject to incoming tariffs remained strong. Orders for vehicles, electrical equipment, and primary and fabricated metals were all up at a sizable pace.
That strength in those categories was an undeniable sign of a major shift in the spending cycle caused by tariffs.
Shipments of the same goods grew at a strong pace of 0.9% in February; that data is a proxy for the private investment component of gross domestic product.
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The increase confirms our view that the rise in the trade deficit, which might be a drag on GDP, will be partly offset by stronger business spending and inventory buildup.
Even if GDP comes in weak for the first quarter, the underlying strength of the economy more likely than not remains solid.
