US Business Spending Surged in October, Challenging Recession Fears

Is the American economy really slowing down? According to Reuters, business investment data from October tells a different story. This unexpected show of strength could signal that recession fears were overblown, reigniting the debate over the Federal Reserve's (Fed) future interest rate path.

A Bullish Signal From the Factory Floor

Reuters reported that both orders and shipments for US core capital goods (non-defense capital goods excluding aircraft) increased in October 2025. This metric is a closely watched proxy for business spending plans. A rise in orders suggests that companies are confident about the economic outlook and are moving forward with investments in new machinery and equipment.

Crucially, shipments of core capital goods are a direct input into the equipment spending calculation in the government's Gross Domestic Product (GDP) reports. The increase in October suggests a positive contribution to Q4 GDP growth, bucking widespread concerns that high interest rates would choke off corporate investment.

The Fed's Dilemma

This data presents a complex puzzle for the Fed. Robust business spending indicates the economy still has significant underlying momentum, which lessens the urgency for any potential rate cuts. If the economy continues to run hot while inflation is not yet fully contained, the Fed might be inclined to maintain its restrictive monetary policy for longer than markets currently anticipate.