In February, there was an unexpected decline in new orders for crucial U.S.-manufactured capital goods, which may continue to be slow due to economic uncertainty caused by tariffs. This uncertainty is discouraging businesses from increasing their spending on equipment.

According to the Commerce Department's Census Bureau, orders for non-defense capital goods excluding aircraft, which is a key indicator of business spending plans, dropped by 0.3% in February. Economists had anticipated a 0.2% increase following a 0.8% rise in January.

Businesses likely accelerated their orders in January to avoid higher prices resulting from tariffs imposed by President Donald Trump. The tariffs on imports have raised concerns among economists about their impact on economic activity.

Both business sentiment and consumer confidence have worsened in recent months. Trump has indicated that some threatened tariffs may not be implemented on April 2 and that some countries might receive exemptions. However, he also mentioned that tariffs on imported automobiles are forthcoming.

Shipments of core capital goods increased by 0.9% in February after a 0.2% decline in January. Non-defense capital goods orders fell by 1.5% following a 12.8% jump in January. Shipments of these goods rose by 0.5% after a 3.2% increase in the prior month.

Core and non-defense capital goods shipments are essential components for calculating business spending on equipment in the gross domestic product report. Business investment in equipment decreased in the fourth quarter, offsetting strong consumer spending.

Growth projections for the January-March quarter are mostly below a 1.5% annualized rate, with a high likelihood of contraction. The economy expanded at a 2.3% rate in the fourth quarter.