US factory orders unexpectedly fall in June

• Orders for computers and electronic products jumped 3.2% in June and were up 13.9% year-over-year, reflecting strong AI-related demand
• Core capital goods orders (non-defense capital goods excluding aircraft) were revised upward to 1.2% growth, indicating solid business equipment spending plans
• Sharp declines occurred in defense aircraft and parts orders (down 7.2%) and mining/oil field machinery orders (down 27.2%)

Summary: US Factory Orders Unexpectedly Fall in June

Key Findings:

U.S. factory orders declined 0.3% in June following a revised 1.1% decrease in May, missing economist expectations of a 0.2% rebound. However, orders remained 5.3% higher year-over-year, indicating underlying strength despite the monthly decline.

Sector Performance:

Strong demand emerged in technology-related sectors driven by AI infrastructure investment. Computer and electronic product orders surged 3.2% monthly and 13.9% year-over-year. Electrical equipment orders increased 1.6%, while overall machinery orders rose 0.3%.

Weakness appeared in defense aircraft and parts (down 7.2%) and mining/oil field machinery (plunging 27.2%). Orders for primary metals, motor vehicles, and commercial aircraft showed increases.

Critical Business Investment Metric:

Non-defense capital goods orders excluding aircraft—a key indicator of business equipment spending—were revised upward to a 1.2% increase from the previously reported 0.9%. Core capital goods shipments also rose 2.0%, supporting double-digit business investment growth for the second consecutive quarter.

Market Context:

Manufacturing represents 9.4% of the U.S. economy and expanded for a seventh straight month in July. The sector benefits from AI infrastructure buildout, though this is straining supply chains and elevating input prices. Businesses are also front-loading orders to avoid potential shortages and price increases related to the U.S.-Israeli war with Iran.

Implications:

Despite the headline decline, underlying demand remains robust, particularly in technology sectors. The AI boom continues driving capital investment, offsetting weakness in traditional industrial categories. The upward revisions to core capital goods data suggest sustained business confidence.