US durable goods orders in March surged beyond expectations as the nondefense aircraft segment drove the headline orders total higher. However, when looking at the details, there were signs of stagnation that are early signals of weaker economic growth in the second quarter of 2025. Overall, the macro outlook for industrials continues to be bleak as signals of demand falter.
Durable Goods New Orders
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The first estimate of durable goods new orders in March was an increase of 9.2% MoM over February, well beyond the expected growth of 2.0% MoM. On an annual basis, orders were up 11.9% YoY, the highest since January 2022. In raw value terms, new orders reached an all-time high of over $315 billion. While the numbers look impressive, they were driven by a surge in nondefense aircraft and parts new orders of 139.0% MoM and 99.3% YoY. Thus, we must look at other aggregates to get a better idea of how the broader durable goods sector fared in March.
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When excluding transportation, durable goods new orders were basically unchanged on a monthly basis, posting the lowest gain since a decline in November 2024. The details suggest there was some variance across industries. Primary metals was the strongest segment, up 0.7% MoM, followed by modest increases in fabricated metal products (+0.2% MoM) and machinery (+0.1% MoM). The weakest segments were the electronics and electrical equipment segments, down -1.2% MoM and down -0.5% MoM respectively. The trend of new orders so far in 2025 is consistent with the reports of manufacturers front-running the Trump tariffs, as seen in the February boom giving way to a weak March.
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The core nondefense capital goods (ex-aircraft) segment did manage to eke out a small 0.1% MoM increase in March, but this was still below expectations of an 0.2% MoM gain. Shipment growth in this segment also slowed, up just 0.3% MoM in March after an 0.7% MoM increase in February. When looking at Q1 2025 as a whole, both shipments and new orders showed signs of acceleration coming out of the final quarter of 2024. In fact, the increase in core capital goods orders in Q1 2025 was the strongest since Q2 2022. Unfortunately, based on the change in US trade policy and an increase in global tariff rates, I believe this acceleration was a result of tariff front-running that will not carry over into Q2 2025.
S&P Flash PMI
The recently released S&P Flash US PMI is one forward-looking indicator that suggests industrial growth will be subdued in the next few months. The April reading of the US Manufacturing Output Index did increase to 50.2, but several comments suggested that conditions were weak. While domestic manufacturing orders saw a slight increase, S&P reported a “marked fall in export orders.” The trend was much weaker in the services sector where export orders fell at the sharpest rate since January 2023. Confidence also took a hit in April with manufacturing sentiment reported at the lowest since August 2024 and services sentiment at the weakest since October 2022. S&P Global’s Chris Williamson summed up the April flash report like this:
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Beyond just the S&P Flash PMI, there is evidence of a major drop-off in demand in the regional PMIs. I constructed an index that tracks the subcomponents of the various regional manufacturing PMIs from Federal Reserve branches and the major S&P and ISM PMIs. The New Order subcomponents of these surveys reveal a sudden and sharp decline in demand in the last two months that hasn’t been seen since January 2024. The shipments indicator is lagging behind but also in a strong decline. It is hard to ignore the data when the trend is so broad-based.
US Manufacturers’ Shipments, Inventories, and Orders
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