U.S. Manufacturing Orders Ease in December, Tracking Economist Views

Recent data from the Commerce Department reveals that factory orders retreated in December, aligning with analyst expectations. The pullback reflects broader cooling in domestic manufacturing activity, though the pullback was measured compared to the prior month’s strength.

Factory Orders Decline as Durable Goods Retreat

December saw factory orders ease by 0.7 percent, following a robust 2.7 percent climb in November. This moderation matched consensus forecasts from economists. The retreat was largely driven by weakness in durable goods, which fell 1.4 percent in December after jumping 5.4 percent the previous month. Transportation equipment led the decline, tumbling 5.4 percent in December from a significant 15.2 percent surge in November, suggesting some normalization in demand after the prior month’s exceptional strength.

Shipments Advance While Inventories Stabilize

On a more constructive note, manufactured goods shipments climbed 0.5 percent in December after edging down 0.2 percent in November. Meanwhile, orders for non-durable goods remained essentially flat during December, providing a stabilizing counterweight to durable goods weakness. Inventory levels posted a modest 0.1 percent gain in December after a 0.2 percent increase in the prior month.

The December data shows a more balanced manufacturing landscape. Since shipments growth outpaced inventory growth, the inventories-to-shipments ratio improved to 1.56 in December from 1.57 in November. This suggests manufacturers are working through existing inventory at a measured pace, neither accumulating excess stock nor facing supply constraints—a healthy dynamic for the broader economy.