In February, US business equipment orders rebounded beyond expectations, and the conflicts in the Middle East may impact investment recovery.

Data released by the U.S. Department of Commerce on Tuesday showed a rebound in U.S. business equipment orders in February, indicating that companies were advancing their investment plans before the outbreak of the Iran war. The data showed that after non-defense capital goods orders excluding aircraft, seen as a gauge of equipment investment, were revised down to a 0.4% decline in January, they increased by 0.6% in February. The median forecast from economists surveyed previously was for a 0.5% growth. All durable goods (items with a lifespan of at least three years) orders decreased by 1.4%, mainly reflecting a decrease in aircraft orders. Boeing reported receiving fewer aircraft orders in February compared to the previous month. The durable goods report showed increases in orders for computers, automobiles, metals, and machinery. Economists expect that business investment will remain robust this year as companies continue to invest in artificial intelligence (AI) and benefit from better tax terms. However, it is still unclear how cautious companies will become due to the Iran war. This conflict has led to sharp increases in oil and other commodity prices. Additionally, non-defense capital goods shipments excluding aircraft (data directly included in the GDP report as the equipment investment portion) increased by 0.9%. The government typically uses shipment data rather than cancellable orders as an input for calculating GDP. Economists favor core equipment shipment and order data as they can more clearly reflect trends in basic business investment and their impact on the economy. Stephen Stanley, Chief Economist at Amherst Pierpont Securities, wrote in a briefing that the February rebound in data supported an expectation that non-AI businesses would increase capital spending after a cautious 2025, although this data preceded the Middle East conflict. He wrote, "I suspect that businesses will again turn cautious in March (and possibly in April), waiting to see how high energy prices will rise and for how long." Before the release of the durable goods report, the GDPNow forecast from the Atlanta Fed predicted that business equipment spending in the first quarter would contribute nearly 0.75 percentage points to growth. This spending contributed only 0.21 percentage points in the fourth quarter. The Commerce Department report also showed a nearly 29% decrease in volatile civilian aircraft orders from the previous month. Boeing reported receiving 21 orders in February, down from 107 in the previous month. Boeing also reported delivering 51 aircraft in February, up from 46 in the previous month. The report concluded by showing a consecutive second-month decrease in defense capital goods orders.