In December 2024, the US Durable Goods decline in new orders for manufactured durable goods, with total orders falling 2.2% month-over-month, reaching $276.1 billion. This decrease marked a significant departure from market expectations, which had forecast a modest increase of 0.6%. The decline followed a downwardly revised 2% drop in November, signaling a worrying trend for the manufacturing sector. With this dip, durable goods orders have demonstrated continued volatility in the final month of 2024, raising concerns about the overall strength of the economy going into 2025.

The Impact of Transportation Equipment on Overall Orders

A significant portion of the decline can be attributed to the transportation equipment sector, which saw a sharp 7.4% drop in December. This sector, being one of the largest categories in durable goods, had a disproportionate impact on the overall numbers. Within transportation, nondefense aircraft and parts experienced an extraordinary 45.7% drop, the largest contributor to the decline. Analysts point to reduced bookings from Boeing as a likely cause, reflecting an overall slowdown in aircraft orders. This reduction is a stark contrast to the previous months, when the aerospace industry saw a significant influx of orders. As transportation equipment typically makes up a large share of durable goods orders, this sector’s downturn alone was enough to drive the overall figure lower.

Excluding Transportation: A Mixed Picture

While the transportation sector dragged down the overall numbers, when transportation is excluded from the calculation, the durable goods orders rose by a modest 0.3%. This slight increase indicates that, outside of transportation, there is some underlying stability in the manufacturing sector. However, the overall picture remains mixed, with certain areas of the economy still underperforming.

The Exclusion of Defense: A Broader Weakness

When defense orders were excluded, the picture worsened. New orders fell by 2.4%, further highlighting the broader weakness in manufacturing, especially in sectors outside of transportation. This suggests that the decline is not isolated to a single category but is rather reflective of broader challenges facing the sector, potentially including shifts in demand or disruptions in the supply chain.

Sector-Specific Declines and Gains

In addition to transportation, other sectors also saw declines. Capital goods orders fell by 7.1%, and orders for primary metals dropped by 0.6%. Both of these declines are indicative of potential softness in business investments and manufacturing activity. Capital goods orders, which often serve as an indicator of future business investment, took a substantial hit, pointing to potential concerns over business spending and economic outlook.

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Despite these declines, there were some positive signs in specific subsectors. Notably, orders for nondefense capital goods excluding aircraft—a key indicator of business investment—rose by 0.5%. This increase, following a 0.9% gain in November, suggests that businesses are still investing in equipment and machinery, although at a slower pace than in previous months. These types of orders are considered a critical proxy for future business activity, and the slight gain offers a glimmer of hope for continued business investment.

Conclusion: Economic Uncertainty Continues

The December 2024 data paints a picture of mixed economic signals. While the sharp drop in transportation equipment orders and the decline in capital goods point to potential weaknesses in the manufacturing sector, the modest increase in nondefense capital goods excluding aircraft provides a more optimistic view of business investment. As the year progresses, the manufacturing sector will likely face ongoing challenges, including potential slowdowns in key industries like aerospace and capital goods. However, the slight growth in certain areas suggests that there is still some resilience in the economy, even amidst broader uncertainties.

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