Key Takeaways
- U.S. factory orders rose again in February, marking two months of gains for a manufacturing sector that has struggled under elevated interest rates.
- Tariffs likely contributed to the increase as manufacturers sought to fill orders before import taxes were imposed.
- Higher orders for cars, electrical equipment and fabricated metals could also nod to a rebound from weakness in recent months, economists said.
U.S. factories are starting to show more life, with durable goods orders rising again in February, marking the second consecutive month of increased activity in the underperforming manufacturing sector.
Factory orders for long-lasting, durable goods, which can include everything from computer equipment to industrial machinery to cars and planes, rose 0.9% last month, according to Census Bureau data. The results surprised economists who were expecting orders to drop after last month’s strong growth of 3.3%.
“The underlying trend has turned up recently, improving prospects for the struggling factory sector,” wrote BMO Senior Economist Priscilla Thiagamoorthy.
The report showed that automobile orders increased by 4%, breaking a four-month losing streak. Gains in aircraft and metal orders also helped feed into rising February factory orders. The upward trend in factor orders comes as the U.S. manufacturing sector has struggled under the weight of high interest rates, a problem that President Donald Trump has promised to address through his policies on tariffs.
Tariffs Having an Impact, But Bounce Also Reflects Data Volatility
Uncertain tariff policies are likely having an impact, as markets have been whipsawed by Trump’s announcements regarding import taxes on major U.S. trading partners, including Canada, China, and Mexico. Economists suspect some of the sudden growth is from manufacturers looking to fill orders ahead of potential tariffs.
But the jump in factory orders wasn’t all about trade policy—Wells Fargo pointed to increases in orders for cars, electrical equipment and fabricated metals as proof that there was more to the increase.
“While some of the gain may signal a front-running of tariffs by businesses, we expect the strength more so reflects normal volatility and a rebound after some weak data,” wrote Wells Fargo economists Shannon Grein and Tim Quinlan.
Despite signaling overall positive growth for the manufacturing sector, economists also found a worrying trend. A decline in “core” capital goods orders, which generally includes equipment used by businesses but excludes defense and aircraft orders.
“This component is a good gauge for business investment and it fell for the first time in four months,” Thiagamoorthy wrote.
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