American companies concluded 2025 with robust equipment purchases, as December orders for key manufactured capital goods exceeded forecasts and shipments jumped significantly, according to new federal data released Wednesday.
The Commerce Department’s latest figures show that orders for core capital goods – which exclude defense items and aircraft – climbed 0.6% in December, surpassing economist predictions of a 0.4% increase. This follows a revised 0.8% gain in November.
The year-end surge in business investment, largely fueled by artificial intelligence technology expansion, has analysts predicting sustained economic momentum heading into 2026.
“After the AI boom sustained the business spending category of GDP in the first three quarters of the year, firms outside of the tech space began to re-engage late last year, setting the stage for a noticeable pickup in investment outlays in 2026,” explained Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.
Stanley added: “This has been and continues to be my main justification for expecting an above-consensus economic performance in 2026.”
The artificial intelligence revolution continues driving rapid expansion in data center construction, though import tariffs have dampened manufacturing activity in sectors not connected to AI technology. Economic experts anticipate broader manufacturing recovery this year as tariff uncertainties diminish and tax reductions take hold.
December saw particularly strong performance across multiple sectors. Computer and electronic product orders jumped 3.0%, while fabricated metal products surged 0.9%. Electrical equipment and components rose 0.6%, machinery orders increased 0.3%, and primary metals orders shot up 1.7%.
Core capital goods shipments experienced an even more dramatic rise, jumping 0.9% after November’s modest 0.2% gain. The report’s release was postponed due to last year’s federal government shutdown and arrives ahead of Friday’s preliminary fourth-quarter GDP estimates.
Economists project business equipment spending achieved its fourth consecutive quarter of expansion. The overall economy likely maintained a 3.0% annualized growth rate during the final quarter of 2025, following the July-September period’s robust 4.4% pace.
However, broader durable goods orders – covering everything from household appliances to aircraft designed to last three years or longer – dropped 1.4% in December after November’s strong 5.4% surge.
This decrease stemmed primarily from a 24.9% plunge in non-defense aircraft and parts orders. Boeing’s website indicates the company secured 175 aircraft orders in December, mostly less expensive models, compared to 164 orders in November.
Transportation equipment orders fell 5.3% after rebounding 15.2% the previous month, though motor vehicle orders recovered with a 1.2% increase. Overall durable goods shipments grew 1.0% following the prior month’s 0.3% decline.
Financial markets showed little reaction to the equipment spending data as investors focused on upcoming Federal Reserve meeting minutes from the January 27-28 policy session.
Housing sector developments presented a mixed picture. Single-family housing construction starts, representing the majority of homebuilding activity, increased 4.1% to reach a seasonally adjusted annual rate of 981,000 units in December.
Import tariffs affecting building materials like lumber and bathroom vanities have elevated construction costs, while labor shortages amid immigration enforcement have further constrained building activity.
Multi-family housing starts experienced a dramatic 10.1% surge to 402,000 units annually. Combined housing starts jumped 6.2% to 1.404 million units, marking the highest level since July.
Future single-family construction permits declined 1.7% to 881,000 units in December. Homebuilder confidence continued deteriorating in February, according to National Association of Home Builders survey data released Tuesday, with builders citing expensive land, high construction costs, and elevated home prices relative to household incomes.
The current administration has introduced various housing affordability measures, including mortgage-backed securities purchases and restrictions on institutional investors buying single-family properties. Despite some mortgage rate relief, progress has stalled as federal debt concerns keep Treasury yields elevated.
Since mortgage rates follow 10-year Treasury yields, economists and real estate professionals emphasize that increasing housing supply remains essential for affordability improvements. The delayed fourth-quarter GDP report is expected to show residential investment declining for the fourth straight quarter.
