US Factory Orders Slide 1.1 Percent as Economic Uncertainty Clouds Demand

A factory worker is seen at a wind tower manufacturing plant in Pueblo, Colo., on Nov. 29, 2023. Andrew Caballero-Reynolds/AFP/Getty Images

A U.S. Census Bureau report released on Dec. 23 revealed a sharper-than-expected decline in new orders for durable goods in November, with the pullback in demand for goods ranging from household appliances to heavy machinery signaling persistent challenges for America’s manufacturing sector amid heightened economic uncertainty.

The report revealed a 1.1 percent drop in durable goods orders for November, following an upwardly revised 0.8 percent increase in October. Forecasters expected a more modest 0.4 percent decline in November, with Monday’s print representing a big miss.

Durable goods, which include items designed to last three years or more, require substantial financial commitments from consumers and businesses. The November pullback suggests waning confidence among buyers, reflecting uncertainty over the economic outlook and inflationary pressures.

“Where is this mythical booming economy?” economist E.J. Antoni, a research fellow at The Heritage Foundation, asked in a post on X. He noted that new durable goods orders are now down 5 percent year-over-year, even before accounting for inflationary adjustments, highlighting the ongoing struggles in America’s goods-producing industries.

Recent reports from the Federal Reserve and survey-based measures like S&P Global’s PMI gauge paint a bleak picture of the U.S. manufacturing sector. According to recent S&P Global data, U.S. factory output fell to its lowest level in 55 months in November, paired with a jump in input cost inflation to the highest level in over two years. Regional Fed banks have echoed some of these findings, noting sharp declines in output and new orders.

While the Census Bureau’s decline in durable goods orders reflects weakness, some bright spots emerged. Orders for core capital goods, a key proxy for business investment, rose by 0.7 percent in November, signaling optimism in certain industries. This uptick suggests some manufacturers are investing in equipment upgrades and production capabilities, anticipating stronger demand in the future. Still, the broader manufacturing picture remains challenging, with transportation equipment—a major category—experiencing a 2.9 percent decline in orders.

Adding to the sector’s woes, there are signs that inflationary pressures are intensifying. Input costs for manufacturers have spiked, further compressing profit margins. Federal Reserve officials recently raised their inflation expectations for the coming year sharply while shifting risks to the inflationary outlook from “balanced” to the “upside.” This suggests that inflationary pressures may take longer to dissipate, weighing on the future outlook.

The Census Bureau’s data showing waning demand for durable goods aligns with a Dec. 23 report from The Conference Board, which showed a drop in consumer confidence and growing pessimism about the future. The group’s consumer confidence index fell by 8.1 points to 104.7 in December, with its forward-looking expectations index plunging 12.6 points to 81.1—near the recession signal threshold of 80. While current labor market views improved, optimism about future business conditions and incomes declined sharply.

“Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes. Moreover, pessimism about future employment prospects returned after cautious optimism prevailed in October and November,” Dana Peterson, chief economist at The Conference Board, said in a statement.

Wall Street’s main indexes were mostly higher in early afternoon trading on Monday despite the release of disappointing data on consumer confidence mixed with a retreat in new orders of durable goods.

The S&P 500 was up 0.57 percent at 5,964.68, and the Nasdaq rose 0.87 percent to 21,475.42, with the Dow Jones Industrial Average 0.04 percent lower at 42,823.81 as of 2:07 p.m. on Dec. 23.

After gaining momentum since the November presidential election, Wall Street’s rally stumbled this month, weighed down by the Fed’s revised forecast of only two 25-basis-point rate cuts in 2025—down from four projected in September—and an upward revision to its annual inflation outlook.

Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, said investors are concerned about the economy and the Fed’s future moves and uncertain about the policies of the incoming administration of President-elect Donald Trump.

“There’s concern about the economy. There’s concern about the Fed making a wrong move, and there’s the great unknown of what Trump is actually going to do,” Ghriskey said.

Trump has promised to adopt business-friendly policies that would boost America’s manufacturing sector. He has pledged to reduce U.S. reliance on offshore supply chains by incentivizing domestic production while vowing to lower energy costs, a key input for businesses that impacts bottom lines. The president-elect has also vowed to extend tax cuts, roll back regulations, and renegotiate trade policies to bolster American industry.