Durable Goods Orders Rise in February, Easing Investor Concerns Over Manufacturing Slowdown

The February advance report on U.S. durable goods orders delivered a welcome surprise to markets, as headline new orders rose 0.9% month-over-month to $289.3 billion, topping cautious expectations. This follows an upwardly revised 3.3% increase in January, solidifying a two-month rebound that contrasts with recent soft sentiment surveys. The report reinforces Fed Chair Jerome Powell’s recent comments that hard data hasn’t confirmed the market’s more pessimistic tone—news that could embolden bulls, especially in light of cooler inflation prints from the UK and Australia earlier this week.

Ask Aime: What impact will the February durable goods orders report have on the U.S. economy and the stock market?

Transportation equipment once again led the gains, with new orders rising 1.5% to $98.3 billion. Excluding transportation, orders still increased a solid 0.7%, while excluding defense, orders were up 0.8%. While the bears may argue these gains reflect a pull-forward effect ahead of potential tariff implementation, the breadth of growth across components suggests underlying resilience.

Table 1 reveals a mixed but generally constructive picture beneath the surface. New orders for fabricated metals climbed 0.9% MoM, while electrical equipment jumped 2.0%, indicating continued investment in industrial infrastructure. Machinery orders eked out a 0.2% gain after stalling in January. Meanwhile, computers and related products rose 1.1%, and motor vehicles and parts surged 4.0%, underscoring healthy consumer and commercial demand. However, orders for nondefense aircraft declined 5.0%, giving back a portion of the prior month’s enormous 92.9% spike.

Shipments also delivered a robust showing, climbing 1.2% to $292.3 billion in February, the third straight monthly gain. Transportation was again the driver, rising 2.0% to $96.6 billion. Ex-transportation shipments were up 0.8%, pointing to broader strength. Motor vehicles and parts shipments jumped 3.9%, with electrical equipment and fabricated metals both rising 0.6%–0.7%. Computers and electronics also contributed with a 1.2% gain, suggesting momentum in tech-related manufacturing is holding steady.

The unfilled orders data showed a modest 0.1% increase to $1,402.4 billion, with transportation once more at the helm. Unfilled orders in defense aircraft rose a notable 1.4%, while nondefense aircraft ticked up 0.1%. The consistency of backlog growth—up seven of the past eight months—signals steady demand, helping to underpin future production schedules. However, machinery backlogs slipped 0.1%, and computers and electronics were essentially flat, suggesting some soft spots remain.

Inventories rose just 0.1% to $533.2 billion in February, matching the prior month’s near-flat result. Ex-transportation inventories were unchanged, while defense capital goods inventories rose 0.9%, and nondefense capital goods dipped 0.1%. Importantly, inventories are not running ahead of shipments, easing concerns about unsold stockpiles building up—a trend that could help preserve manufacturing momentum into the second quarter.

Capital goods orders told a more nuanced story. Nondefense capital goods orders fell 1.5% to $89.2 billion, the first decline in three months, raising mild concerns over business investment intentions. Orders excluding aircraft slipped a smaller 0.3%, with flat results in machinery and weakness in communications equipment. Still, shipments in this category rose 0.5%, and backlogs ticked up 0.1%, suggesting the dip in orders may be more noise than signal. Defense capital goods orders also declined 1.6%, though this was offset by a 0.9% gain in inventories.

January revisions were broadly supportive. New orders were revised up by $600 million to $286.6 billion, and shipments were bumped higher to $592.8 billion from $592.1 billion. Unfilled orders were revised marginally downward to $1,400.5 billion from $1,400.6 billion—essentially unchanged. The revisions confirm that January's strength was real, lending credibility to February's continuation.

In total, the February durable goods report adds to a narrative of stabilization—if not outright strength—in U.S. manufacturing. With inflation moderating abroad and Powell highlighting the robustness of hard data, the bulls may find some footing here. Yet skeptics caution that geopolitical noise, tariff effects, and one-off aircraft volatility muddy the signal. Still, as far as hard data goes, this was better than feared—and in this market, that might just be good enough.