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January 27, 2025
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- TrendsTalk
- January 27, 2025
with Michael Feuz
NAVIGATING INTEREST RATES AND INFLATION IN 2025
Timing your capital investments in 2025 is crucial! What strategies can you employ to focus on long-term ROI and positioning for future growth? Let our data insights guide you this week on TrendsTalk.


MEET YOUR HOST
Michael Feuz
Michael Feuz is a key member of ITR Economics’ team of expert economists and consultants. Backed by a decade of experience working for technology start-ups, he contributes to the production of client reports, forecast reviews, economic research, and regular client-facing communications.
“Join me on the TrendsTalk podcast to explore the world of economics. Episodes offer insightful discussion and expert interviews. We cover relevant economic concepts in an accessible way. Whether you are a curious layperson or an industry professional, TrendsTalk is your go-to source for thought-provoking analysis and a deeper understanding of the economic forces shaping our world.”

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.
Hello, everyone. Welcome back to another episode of TrendsTalk. I’m Michael Feuz, filling in once again for Taylor St. Germain. If you’re excited to get Taylor back, he’ll be back soon. Today, I want to talk to everyone about Nondefense Capital Goods New Orders Excluding Aircraft, which is a measure of capital expenditures.
Recently, we tweaked the forecast. And more importantly, I want to talk about timing your capital investments in 2025, kind of tying that to what we’re seeing overall, especially in the current interest rate environment, the inflationary environment, and why it’s key to have a very intentional strategy with your capital expenditures in 2025 with the rest of this decade in mind and the upcoming challenges that the first six years of the 2030s will bear.
So first, let’s start with the non-defense capital goods new orders, excluding aircraft, on a 12-month moving total, that 12 MMT, it’s been hovering, just trending flat, right around the $885 billion mark for most of the past year, most of 2024.
When we’re looking at that 12-12 rate of change, it’s at 0.4%. It’s been in that phase C slowing growth, been a lot of just easing, kind of slow down in that capital expenditures is why we’ve seen that flat 12-month moving total trend, that 12-12 certainly shown it, a lot of just wait and see type of behavior from businesses when it comes to that capital expenditures, this has been driven.
by, yes, the inflationary environment, the high interest rate environment, and the uncertainty likely stemming from the election jitters of 2024. We’re now well past that. We’re past the inauguration.
Hope we can put some of those types of jitters behind us. Now, I mentioned we did adjust our forecasts for non-defense capital goods, new orders. It was a, we were seeing a slight overperformance even despite the flatness.
Now, so we did do a slight increase in the near term. The overall general trend is holding. We expect general flatness to occur through till the middle of this year, begin to pick up. And between 2025 through 2026, we anticipate general rise.
By the end of next year, we anticipate about a 7% increase from where the levels are right now. Now, if you’re planning your own capital investments in 2025. The key message I want to leave you with, and here at ITR we are communicating out to all of our clients, is do not delay for too long.
Why are we saying this? Let’s start a little bit just with our interest rate expectations. We do still and consistently see 2025 as the best interest rate environment you’re going to get likely for the rest of this decade.
Now, future Federal Reserve rate cuts will be limited in their quantity and in their magnitude. So additionally, with that we’re looking, let’s take a look at US government long-term bond yields. That certainly kind of reflects the outlook for interest rates into the future.
And the marketplace is showing little appetite for lowering interest rates. This is following a very hawkish Federal Reserve meeting mid-December. Government long-term bond yields have ramped up a bit, getting close to that 4.7% mark.
As of January, maybe two weeks ago, I think it was January 8th in the data. Short-term and long-term year rates, we have gotten that normalization of the yield curve. So we’ve seen that short-term now go below the long-term, but that long-term has been very sticky in its normalization pattern.
Short-term rates will likely to come down marginally over the next several quarters, but there’s a lot of upside pressure that’s facing these bond yields, inflationary upside pressure. We’re looking at the impact of tariffs with this new administration.
Those are absolutely inflationary. We’re seeing the rise in the M2 money supply. Government deficit spending, our payments on our debts, tight labor markets, AI really putting upward pressure on electricity costs.
All of these are upward pressures on inflation, which will raise that expectations for interest rates. So while we do see, again, I’ll repeat, this year will be the likely the best we see the rest of the 2020s.
For interest rates, any future easing will be very mild. And I want to put an emphasis on that word, mild. So that big question is, how should business leaders time their capital investments in 2025?
When making investments decisions, do not try to time rates. Instead, focus on that longer term ROI and your strategic positioning for macroeconomic growth. This decade and how you want to use this decade to set yourselves up for those challenging six years that are coming in the 2030s.
So rather than waiting for better rates or the perfect best rates. Business leaders will be better served to calculate the time it will take your capital investments to deliver that ROI you’re after.
You want these investments up and running to capitalize on this growing economy that will certainly pick up in the second half of 2025. So thinking about timing it again, understand your leading indicators.
If your business is very closely correlated to US industrial production, we anticipate that activity in the industrial economy to start to pick up at higher rates towards the middle of this year. So understanding when you need to make that capital investments to receive those orders, to get them up and running and added so you can capture the organic growth opportunity.
Now, if your business time differently, the industrial production, it’s key to understand your leading indicators so you can appropriately strategize to capitalize on these investments. That’s what we’re here to help with at ITR.
So always open invite to reach out to engage with us. We’re working with their clients every day so they can understand their business, their markets, so they can position themselves to be successful in every phase of the business cycle and to prepare for the opportunities that are coming and to mitigate any risks that are out there.
So with that, I’ll leave it there. I’m Michael Fuze again, economist and speaker here at ITR economics. Look forward to speaking to you again on future trend stocks, but Taylor will soon return and thank you.