US factory orders unchanged in February for second straight month

• Commercial aircraft orders dropped 28.6%, while orders increased for computers, electronics, machinery, primary metals, and fabricated metal products
• Core capital goods orders (non-defense excluding aircraft), a key indicator of business investment, were revised up to 0.7% growth in February
• Oil prices have surged over 30% due to the Iran conflict, potentially threatening manufacturing's recovery after earlier damage from Trump administration tariffs

Summary

Key Facts:

U.S. factory orders remained flat in February 2025 for the second consecutive month, beating economist expectations of a 0.2% decline. Year-over-year orders increased 3.7%. The data release was delayed due to a prior government shutdown.

Sector Performance:

Commercial aircraft orders plummeted 28.6%, offsetting gains in other sectors including computers and electronic products, machinery, primary metals, and fabricated metal products. Manufacturing represents 10.1% of the U.S. economy.

Capital Spending Indicators:

Orders for non-defense capital goods excluding aircraft—a key proxy for business investment—rose 0.7% in February (revised from 0.6%). Shipments of these core capital goods increased 1.0%, up from the previously reported 0.9%.

Market Implications:

The manufacturing sector was showing recovery signs after being impacted by President Trump's tariffs. However, the outlook faces significant headwinds from the U.S.-Israeli war with Iran, which has driven oil prices up more than 30%. This surge in energy costs threatens to stifle the nascent manufacturing recovery.

Context:

The mixed data reflects ongoing volatility in the manufacturing sector, with weak commercial aviation demand contrasting against strength in technology and metals. The substantial oil price spike from geopolitical tensions represents a major risk factor for future factory activity and broader economic growth, as higher energy costs typically pressure manufacturing margins and dampen business investment.