Spending on long-lasting manufactured goods fell in December, but increasing orders of core capital goods suggest growth in the sector after a decline early last quarter.
Orders of durable goods—manufactured items with a lifespan of more than three years—fell 1.4% in December, according to Wednesday’s advance report from the U.S. Census Bureau. Excluding the volatile transportation and defense sectors, however, core orders rose by 0.6%, surpassing the previous month’s gain.
Although manufacturing remains vulnerable to tariffs and inflation, capital expenditures on durable goods have climbed since June, signaling renewed activity in the sector to start 2026. The uptick suggests that U.S. manufacturers may be expanding their production capacity in anticipation of broader economic growth in the months ahead.
December’s decline in total orders was expected by economists after one industry giant skewed headlines the month prior. November’s 98% increase in civilian aircraft orders came after the Dubai air show in October, when Emirates and flydubai purchased 140 planes from Boeing for a sum of $52 billion.
“Boeing had strong orders in November,” said Christopher Low, chief economist at FHN Financial. “They fell back to something a little closer to the seasonal norm in December.”
Excluding costly and irregular transportation orders, growing business investment in machinery, equipment and electronics are key indicators of a healthy manufacturing sector. December’s increase in capital goods orders was mirrored by a 0.9% increase in shipments, a figure that will factor directly into the fourth-quarter 2025 gross domestic product scheduled for release on Friday.
“We’ll probably see a positive contribution from the [capital expenditures] component of GDP,” said Kevin Cummins, chief U.S. economist at NatWest. “And I think that probably broadly reflects a little bit more certainty with regard to the economic outlook, particularly [with] uncertainty around tariffs fading.”
Wide-sweeping tariffs hit the manufacturing sector hard in 2025, disrupting supply chains and increasing input costs for vehicles, critical minerals, semiconductors, and other equipment and machinery. While December’s durable goods report points to a production rebound, President Trump continues to push for lower interest rates to fuel domestic industry growth.
Cummins, however, remains unconvinced the Federal Reserve will budge anytime soon.
“ I think this ‘wait and see’ approach is likely to persist,” Cummins said. “If they’re not too worried about downside risk to the economy, [the Fed] can take their time and see how things unfold before having to potentially consider cutting rates again.”
The Fed will also continue monitoring the ISM Manufacturing PMI, which measures growth in the manufacturing sector by weighing new orders, production, employment, supplier deliveries and inventories. January’s index rose by an unprecedented 9.2%, signaling expansion in the manufacturing sector for the first time in 12 months.
Though a positive development, these numbers fail to account for key market trends—businesses often restock their inventories in the new year, and some may have purchased larger orders in anticipation of more tariffs from Trump. Cummins added that anecdotal information in the report was mixed as compared to its hard data, saying he “ wouldn’t necessarily emphasize the strength of the rebound.”
To understand the full picture of where U.S. industry is headed this year, economists are still waiting on several key figures from 2025 that were delayed by the government shutdown in October and November. In particular, a strong GDP report on Friday may help to bolster business confidence and temper concerns about inflation.
Despite lingering uncertainty over business investment, Low maintained a positive outlook on the manufacturing sector’s recovery in 2026.
“My sense is that things came back and are on a pretty solid footing now,” said Low.
