US durable goods orders unexpectedly rise, core orders drop

New orders for manufactured durable goods in the US unexpectedly increased by $2.7 billion, or 0.9%, month-over-month to $289.3 billion in February 2025, following an upwardly revised 3.3% jump in January and defying expectations of a 1% decline. The data suggested that demand for long-lasting manufactured goods remained resilient despite economic uncertainty.

US durable goods orders unexpectedly rise, core orders drop

The increase was largely driven by transportation equipment, which rose by $1.4 billion, or 1.5%, supported by strong demand for motor vehicles and parts (4%) and a notable 9.3% surge in orders for defense aircraft and parts. Orders also climbed in several other key sectors, including machinery (0.2%), fabricated metal products (0.9%), computers and related equipment (1.1%), and electrical equipment, appliances, and components (2%). The broad-based gains indicated that certain industries were still expanding their investments, even as others pulled back.

Weakness in business investment

However, there were signs of weakness in business investment. Orders for capital goods fell by 1.5%, and more notably, orders for non-defense capital goods excluding aircraft—a closely watched proxy for business spending plans—declined by 0.3% in February. This marked the first contraction in four months and followed an upwardly revised 0.9% gain in January, coming in worse than the expected 0.2% increase. The downturn signaled that businesses may be becoming more cautious about investing in equipment, possibly due to concerns over future economic conditions, high borrowing costs, and lingering uncertainty around potential new tariffs.

Uncertainty from US policies

With trade policy in focus, uncertainty surrounding upcoming tariff measures—particularly those expected to target autos, semiconductors, and pharmaceuticals—could be making businesses hesitant to ramp up spending on equipment. Additionally, the Federal Reserve’s stance on interest rates remains a key factor in investment decisions, with firms waiting for more clarity on the potential timing of rate cuts before committing to significant capital expenditures. The data adds to the broader debate over the strength of the US economy, as policymakers and investors weigh resilient consumer demand and manufacturing gains against persistent headwinds in business investment.