The boom in artificial intelligence products and infrastructure drove a closely watched measure of business spending to a six-year high in March.
New orders for nondefense capital goods, excluding aircraft, rose 3.3% in March, accelerating from the increase of 1.6% in February, the Census Bureau reported Wednesday (April 29).
This metric, dubbed “core capital goods” by economists, is closely watched as a barometer of business investment, according to multiple media reports.
Reuters reported Wednesday that the increase in core capital goods orders was larger than expected. Economists polled by the news organization had expected a 0.5% rise.
The report attributed the rise in business spending on equipment to the boom in investments in AI and the data centers that support the technology.
It added that businesses may also be rushing to buy equipment before prices rise or shortages occur due to the war with Iran.
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The Reuters report quoted Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, as saying: “The stunning degree of strength during a month when firms would have had valid reason to be cautious attests to the substantial energy in business development that was bottled up last year due to policy-related uncertainty.”
Bloomberg reported Wednesday that the rise in core capital goods orders seen in March was the greatest since mid-2020.
The report said this increase continued a year of “solid” capital investment that has been driven by businesses’ spending on AI.
Economists expect this trend to continue through the end of 2026 due to spending on AI and the availability of more favorable tax provisions, according to the Bloomberg report.
The report quoted Eliza Winger, economist at Bloomberg Economics, as saying: “Business investment is entering the second quarter with solid momentum, supported by strength in AI-related spending. While geopolitical uncertainty bears watching, the data don’t point to any meaningful pullback in capital spending yet.”
It was reported Thursday (April 23) that Meta plans to cut 10% of its workforce to offset the investments it has been making in AI infrastructure. The company plans to spend between $115 billion and $135 billion this year on data centers, chips and other AI infrastructure.
On April 20, it was announced that Anthropic has committed to spend over $100 billion over the next 10 years on Amazon Web Services (AWS) technologies, including Trainium and Graviton hardware.
It was reported April 1 that Meta, Google and Amazon plan to spend tens of billions of dollars more on data centers this year than they expected to meet the demand for AI.
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