Ahead of tomorrow’s advance report from the U.S. Census Bureau, economists forecast positive growth in the orders and shipments of long-lasting manufactured goods.
The manufacturing industry has proved surprisingly resilient to Trump’s tariffs as well as rising fuel prices from the Iran war. While business investment remains strong, geopolitical and inflationary pressures have dampened the confidence of U.S. consumers and could impact the sector in the months ahead.
Here are five key takeaways and predictions ahead of the March durable goods report:
Rebound in transportation orders
Most of the growth in headline orders will be driven by the highly volatile transportation sector, which saw a 1.4% decrease in orders last month. The most high-ticket durable goods include aircraft ordered from Boeing, which is the largest U.S. exporter in manufacturing. In March, Boeing recorded 31 new orders, up from 15 in February. With most Boeing aircraft priced above $100 million, this increase alone will result in a seven-figure swing in tomorrow’s report.
Business sentiment remains strong — for now
Economists expect a 0.5% increase in orders of core capital goods, a key measure of business investment in equipment and machinery. Moreover, the ISM Manufacturing PMI — an indicator of overall health in the manufacturing sector — rose to 52.7 in March, its highest level since August 2022. Both data points suggest that U.S. manufacturers have largely recovered from the shock of Trump’s tariff regime last year. That said, the ISM report also cited the negative impact of shipping delays and increasing input prices due to the Iran war — factors which are more likely to appear in future data.
Increased shipping and logistics costs
As the Iran war continues to disrupt the global oil supply, gas prices in the U.S. have surged by more than 30%. As a result, manufacturers face higher shipping costs for both raw materials and finished goods. If the oil crisis continues, they will increasingly have to choose between absorbing these costs or passing them down the supply chain to consumers. The former may limit their ability to invest in core capital goods, while the latter could dampen consumer demand.
Weakened confidence among consumers
Over the past month, U.S. consumer confidence dropped to its lowest level since June 2022, according to the University of Michigan’s consumer-sentiment index. The Conference Board’s Consumer Confidence Index also suggested that Americans are increasingly pessimistic about their job prospects and household income level amid inflationary pressures from the Iran war. As this uncertainty continues to cloud the economic outlook, consumers may curb their spending on manufactured goods in the coming months.
The Fed stays put
In March, the Producer Price Index (PPI) reached its highest annual rate since 2023, signaling the growing input and production costs of U.S. manufacturers. With elevated inflation reflected in PPI and other key indicators, most economists expect the Fed to hold off on cutting interest rates for the foreseeable future. This restrictive policy is generally harmful to the interests of manufacturers, which rely on borrowing to finance business investment and expansion.
