Durable goods orders have been picking up — and it’s not just AI

Orders of expensive, long-lasting equipment were up in September, according to fresh data from the Commerce Department. Core durable goods orders — which doesn’t include the volatile defense and aircraft categories — ticked up half a percent from the month before, and rose 10 of the last 12 months.

While it’s true that a lot of that spending is being driven by artificial intelligence development, the strength in durable goods orders over the last year isn’t all about new tech.

There were a few categories in the latest durable goods report where one can draw a direct link to AI spending. Orders of computers and electronics both rose, for example. But other types of orders that picked up are a lot more broad.

“I’ve been struck by the strength of the machinery category,” said Meagan Schoenberger, senior economist at KPMG.

Machinery orders were up more than 16% from the same time a year ago.

“And that’s not just AI, because machinery is feeding into all types of manufacturing, and other types of production,” she said.

And demand for manufactured goods has been strong across several industries.

“Transportation equipment, plastics, miscellaneous manufacturing. Things like that are all also expanding,” Schoenberger said.

That could be because consumer demand in general has been resilient. And because some industries are benefiting from government efforts to support the manufacturing sector.

Scott Paul, president of the Alliance for American Manufacturing, said that’s not because of any one particular policy. “But it’s rather, I think, the private sector looking at what the past couple of administrations have done, and determining that investing here is the wise thing to do, as long as consumers keep on spending,” he said.

Businesses might also be buying new equipment because they’ve been putting off those purchases after years of uncertainty.

“I don’t think things have necessarily settled, I think there’s a lot of uncertainty out there still, but there comes a point where you just need to update your equipment,” said Shannon Grein, an economist with Wells Fargo.

She said some things are a little more certain, including the interest rate for financing a piece of equipment.

“Maybe you were waiting for rates to move lower, and now it’s pretty clear that they’re not,” Grein said. And if businesses know rates are going to keep rising, buying something today might make more sense.