Core business spending on equipment had another month of volatility in June, with orders falling by a sizable 0.7%.
The data reaffirms the extent to which uncertainty from tariffs has disrupted business activity, with volatility intensifying in the second quarter since sweeping tariffs were announced in April
Orders for core capital goods—a proxy for future private investment in GDP—are now down 1.7% on a three-month annualized basis, a real concern heading into the third quarter.
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In contrast, shipments of core capital goods remained in positive territory during the second quarter, rising by 0.4% on the month and by 3.1% on a three-month annualized basis.
As a result, we expect the nonresidential private investment component to continue contributing to GDP growth in the second quarter.
With some tariffs delayed until August and new trade deals emerging, we believe volatility will remain a feature—not a bug—in the coming months.
The whipsaw changes in trade policy will most likely continue to distort business spending patterns. On top of that, higher tariffs may erode profit margins, giving companies less incentive to invest amid ongoing uncertainty.
