Businesses entering the fall planning season face strong capital equipment demand and significant long-range uncertainty.
ITR Economics' central message is that the current CapEx cycle remains favorable, but leaders should not assume today's pace will continue in a straight line. Growth is expected through 2026 and into part of 2027 before conditions soften in the second half of 2027 and the first half of 2028.
US Nondefense Capital Goods New Orders (excluding aircraft) reached $963 billion over the most recent 12 months. New Orders were up 7.3% year over year, while the most recent three months were 12.0% above the same period one year earlier. Shipments were up 6.0% and typically follow orders with a short lag. Healthy profits, available credit, tighter inventories, and export trends support near-term business-to-business spending.
AI infrastructure and data-center construction are major drivers of the expansion. Data-center spending totaled $56.6 billion over the most recent 12 months, and committed projects point to further near-term growth. Suppliers of electrical equipment, semiconductors, communications systems, cooling equipment, and construction machinery may continue to benefit. However, the rapid pace of growth is not sustainable indefinitely. Businesses with concentrated exposure to the data center market should maintain diversification, cash reserves, and a plan for an eventual pullback.
Capital goods performance is broad but uneven. Industrial machinery, communications equipment, computers and electronics, construction machinery, electrical equipment, and HVAC are among the stronger areas, with much of the demand tied to AI, electrification, and infrastructure. Material-handling equipment remains weaker following post-pandemic warehouse overbuilding. Also note that price increases are contributing to dollar-denominated growth, so businesses should distinguish rising revenue from rising physical volume.
Inflation, financing, and labor availability will continue to shape investment decisions. Consumer inflation is expected to remain above 2% for at least three years, while producer-price inflation may briefly ease further out in 2027. Long-term interest rates are unlikely to return to pre-pandemic lows, even if the Federal Reserve lowers short-term rates. Prime-age labor-force participation is also high. Investments that automate processes, raise output per employee, or improve efficiency may help address labor scarcity and margin pressure.
Longer-range planning is equally important. ITR Economics forecasts a 2030-2036 depression marked by prolonged weakness rather than a sudden 2008-style collapse. Organizations should evaluate whether investments can earn their return before the 2030s, whether planned capacity fits their markets' long-term trajectory, and whether financing leaves enough flexibility for more difficult conditions. Strong CapEx plans will balance current opportunities with efficiency, liquidity, controlled leverage, and resilience.
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