June 30, 2025

Hi everyone, my name is Taylor St. Germain with ITR Economics and welcome to this edition of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence and today I wanted to discuss uncertainty and what it means for Capital Investment, what it means for CapEx.

There are a lot of clients and folks that follow ITR that have been asking, you know, when is money going to be spent? When are businesses finally going to invest in CapEx? Invest in new inventories, increase their capacity? Because there’s been a lull in the first half of this year.

There is a lot of uncertainty out there. When we look at the US Trade Policy Uncertainty Index, the index value is 6,580 and that might not mean anything to you, but let me put that in context. That’s about six times higher than it was at the height of the pandemic. We are that uncertain, especially as it relates to trade policy today. And some of that uncertainty has led to hesitancy on the part of businesses to invest in CapEx to increase their level of spending. Let me call out where CapEx is today.

For those of you that follow ITR, we look at a series called US Non-Defense Capital Goods New Orders. This is our proxy for business-to-business spending, or CapEx spending. That data set is currently still negative year-over-year. New Orders is down 0.2%, so that’s a minus 0.2% compared to the same time last year. This growth rate has been negative for the better part of the last 12 months. As we look at the second half of this year, we are expecting to see that growth rate finally transition to the positive territory and see businesses increase their level of CapEx spending.

Now, as many of you know, we look at leading indicators. The first data set that I’d like to mention is Exports of Goods to the Rest of the World from the United States. This is a four-month leading indicator and it has a remarkable correlation historically to CapEx. The good news is that U.S. Exports of Goods to the Rest of the World is currently up 5.7%. It’s in accelerating growth, and that accelerating growth suggests that we continue to see the improvement in CapEx here in the near term over the next four months. So that’s great news. That’s one leading indicator that suggests there’s more CapEx investment coming our way.

The second indicator I’d call out is copper. Copper prices are a great indicator for a number of macroeconomic series. The reason copper prices have such nicer or positive correlations with macroeconomic data sets is because of the wide use of copper. Now copper prices are currently up 11% year-over-year, and again we’ve seen that acceleration in copper prices over the last 11 months. And that is an eight month leading indicator to CapEx activity.

So we have exports for the rest of the world suggesting there’s more demand for U.S. products despite tariffs and despite this uncertainty. We have copper prices increasing, which is often an indication that industrial demand’s increasing. And both of these suggests that CapEx spending is going to accelerate.

So there’s good news coming, folks. The second half of this year, we do expect to be stronger than the first half of the year. Yes, there’s still concerns around uncertainty, but I urge you to take a look at the data, look at these leading indicators, because if you’re watching these, you’ll be preparing yourself for growth. And that’s still the message is we see momentum building in the second half of this year and carrying us into 2026 where we expect a record high amount of CapEx activity. That’s really what we want you to be preparing for is this increasing demand, this increasing CapEx that is very likely coming our way.

Again, I know there’s a lot of uncertainty. I know there’s things being mentioned in the media that are often negative. But when we look at the underlying data, there’s better times ahead. And we need to be preparing for those better times ahead. Otherwise, we’re not going to be prepared for the growth that’s coming our way.

Thanks so much for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. And I look forward to seeing you on the next one. Take care for now.