Business investment surges again on AI spending, but manufacturers still in a slump

By Jeffry Bartash -

Durable-goods orders get boost from Pentagon

Employees assemble appliances at a GE work site in Kentucky.

The numbers: Business investment rose in September for the third month in a row - buoyed by spending on artificial intelligence - but the slumping industrial side of the U.S. economy only showed mild signs of improvement.

Orders for durable goods rose 0.5% in the month before the government shutdown, according to a long-delayed report. The increase was driven by a surge in contracts by the military for jet fighters and other aircraft.

Orders were basically flat if Pentagon spending is omitted. Durable goods are products such as cars and computers meant to last a long time.

Manufacturers have struggled this year to cope with higher U.S. tariffs and lower demand among customers, especially overseas. Tariffs have raised costs and forced companies to increase prices, but in doing so, they have scared off some customers.

Companies are still spending more on computers, software and other technologies, however, in an effort to incorporate AI into how they do business.

Economists polled by the Wall Street Journal had forecast a 0.5% rise in durable-goods orders in September

Key details: The most important part of the durable-goods report was quite positive. Core orders, or business investment more broadly, rose almost 1% in September after similarly large increases in the prior two months.

Core orders climbed 16% in the 12 months ending in September. These orders tend to hint at the future performance of the U.S. economy.

Big picture: U.S. manufacturers are still trying to adjust to higher and ever-changing tariffs, and that's been a big impediment to sales. Business leaders hope the trade fights die down soon so they can figure out how to grow their companies again.

Looking ahead: Once tariff policy is settled, "I look for business investment to accelerate noticeably, said Stephen Stanley, chief economist of Santander Capital Markets. "Today's numbers suggest that this scenario may already be beginning."

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to rise in Wednesday trading.

-Jeffry Bartash

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11-26-25 0926ET