U.S. Factory Orders Stall as Aircraft Slump Masks Broader Manufacturing Gains

By Rosemary

New orders for U.S. manufactured goods held steady in February, marking the second consecutive month without growth as a sharp decline in commercial aircraft demand offset gains across several key industrial sectors.

Data released Friday by the U.S. Census Bureau showed that factory orders were unchanged during the month, defying economists’ expectations for a modest 0.2% decline. On an annual basis, however, orders remained stronger, rising 3.7% compared with the same period a year earlier, suggesting that underlying demand has not fully weakened despite recent headwinds.

The latest figures come as the Census Bureau continues to work through a backlog of economic data following disruptions caused by last year’s government shutdown, which delayed the release of several key reports and complicated efforts to track short-term trends in the manufacturing sector.

Manufacturing, which accounts for approximately 10.1% of the U.S. economy, had shown tentative signs of recovery in recent months after being weighed down by sweeping tariff policies introduced under President Donald Trump. Those measures increased input costs and disrupted supply chains, dampening industrial activity. While some stabilization had begun to emerge, the sector now faces renewed uncertainty tied to rising energy prices following the escalation of conflict involving Iran.

Oil prices have surged by more than 30% amid the geopolitical tensions, raising concerns that higher fuel and transportation costs could once again pressure manufacturers’ margins and slow the pace of recovery. Elevated energy costs tend to ripple across the industrial economy, affecting everything from raw material production to distribution.

The headline stagnation in February was largely driven by a steep drop in orders for commercial aircraft, which fell 28.6% during the month. Aircraft orders are typically volatile and can significantly influence overall factory data due to their high value and irregular timing.

Excluding the aviation sector, the report pointed to more encouraging signs of demand. Orders increased in several categories, including computers and electronic products, machinery, primary metals and fabricated metal products. These gains indicate that business investment and industrial activity in core sectors remain relatively resilient despite broader uncertainties.

A closely watched measure of business spending plans—orders for non-defense capital goods excluding aircraft—was revised higher, rising 0.7% in February rather than the 0.6% initially reported. This category, often referred to as “core capital goods,” is seen as a proxy for companies’ willingness to invest in equipment and expand productive capacity.

Shipments of these core capital goods also exceeded earlier estimates, increasing 1.0% instead of the previously reported 0.9%. The upward revision suggests that business investment maintained some momentum during the month, even as external pressures mounted.

Taken together, the data present a mixed picture of the U.S. manufacturing landscape. While the sector has avoided a decline in overall orders and continues to show pockets of strength, the combination of volatile aircraft demand and rising input costs linked to global energy markets is creating an increasingly complex operating environment.

Economists say the trajectory of manufacturing in the coming months will depend heavily on the evolution of geopolitical tensions and their impact on energy prices, as well as on whether domestic demand can remain strong enough to sustain investment and production.