Invest1 publisher3 min readPublished
US core capital goods orders jump 14.1% to $88 billion in August
US manufacturers booked $88 billion of core capital goods orders in August, up 14.1% from a year earlier, according to Census Bureau data. Wolf Richter credits the AI build-out, but orders can sit in backlog for months, longer if reported turbine-blade shortages persist.
The Investor · Invest desk
What happened
- Core capital goods, meaning durable goods excluding defense and aircraft, are the Census series most often used as a proxy for US business investment.
- Machinery orders rose 1.1% from July and 15.1% on the year to $45.5 billion, a figure Wolf Richter ties to the data-center build-out.
- Orders for computer and electronic products held at $31 billion in August, unchanged from July, and were 16.5% higher than a year earlier.
- All durable goods orders, including aircraft and defense, were flat in August at $339 billion seasonally adjusted and up 8.5% on the year.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- constraint If the reported shortages of turbine blades and vanes persist, these orders turn into shipments and manufacturer revenue more slowly, and backlogs grow instead of output.
- contradiction Electrical equipment, which includes data-center gear, grew only 7.6%, and the IT line was flat on the month, so the AI reading of August rests mostly on machinery.
- cost The orders are dollar figures, and with Richter flagging inflation pressure in the September PMI, some of the 14.1% may be buyers paying more for the same equipment.
An order is a claim on a factory's future output. Wolf Richter wrote on Wolf Street that it may take months before an order comes out of the backlog as production, sales and investment [10]. Working back from the 14.1% growth rate, August's $88 billion compares with roughly $77.1 billion a year earlier. That means buyers committed about $10.9 billion more in one month than they did twelve months before [1].
Richter wrote that the growth rates are "largely driven by the AI infrastructure buildout boom" [12], and most of his evidence is in machinery. "This has data center buildout written all over it," he wrote of the $45.5 billion machinery figure [13][3]. That total is up from about $39.5 billion a year earlier, a gain of nearly $6 billion [2]. The machinery industry code covers makers of engines, turbines and power transmission equipment and of commercial air-conditioning and refrigeration. It also covers construction, farm and mining machinery [4]. Among the orders, Richter lists gas-turbine and diesel generators for data centers [15].
The other lines are softer. Computer and electronic products, a category that includes semiconductors ordered from US-located fabs, rose 16.5% on the year, or about $4.4 billion, but did not grow at all from July [5][3]. Richter says electrical equipment includes some of the gear data centers need. It rose 7.6% to $19 billion, the slowest of the four industries he highlights, while fabricated metals rose 8.6% [6][7].
Those four industry totals add up to $140.5 billion, well above the $88 billion core figure [4]. They count each industry's orders more broadly than the core series does, so they cannot be read as its components. A cleaner comparison is available inside durable goods. Total durable orders of $339 billion rose 8.5% on the year [8]. Take out the core $88 billion and the rest grew about 6.7%, so investment goods are growing at roughly twice the pace of everything else [5]. On a three-month average, which smooths out single-month swings, all durable orders rose 9.3% on the year [9].
Three readings fit these numbers. The orders could clear into shipments on schedule, and factory output would then climb over the coming months. Supplier capacity could instead hold them in the backlog: Richter cites reports of intractable shortages, including of turbine blades and vanes, that are tangling up supply chains [11]. Or some of the 14.1% is price. Richter sets the orders beside a September flash PMI that he says "had inflation pressures written all over it" [14].
I think the second reading is the likeliest. Machinery, up 15.1%, is the industry that includes turbine makers, and turbine parts are what Richter describes as scarce [3][4][11]. The strongest case against that view is the third reading. If prices explain a large part of the dollar growth, fewer machines are being ordered than a 14.1% rise implies, and the data-center signal is smaller than the headline number.
What to watch
- Census shipments and unfilled orders for core capital goods: orders that keep climbing while shipments stall would confirm that supplier capacity is holding them up.
- Whether September machinery orders hold near $45.5 billion, since that line carries most of the evidence for the data-center reading.
- Price components in the next S&P flash PMI, to judge how much of the dollar growth in orders is price.