• US factory orders fell 1.3% month-over-month in July, slightly better than the estimated 1.4% decline.
  • Orders excluding the volatile transportation sector rose a solid 0.6%, indicating pockets of resilience.
  • The data reflects a manufacturing sector in contraction, pressured by high tariffs and waning demand for big-ticket items like aircraft.

New data from the Commerce Department shows new orders for manufactured goods fell for the second consecutive month, declining 1.3% in July. The drop was largely anticipated by economists, who had forecast a 1.4% decrease. The headline figure was dragged down by a significant 2.8% drop in durable goods orders, with transportation equipment—notably aircraft—acting as the primary anchor.

However, a more detailed look reveals a more nuanced picture. When stripping out the transportation sector, which is prone to large monthly swings, new orders for factory goods actually climbed 0.6%. This suggests underlying demand in other key areas of manufacturing remains intact. Sectors including machinery, electrical equipment, and metals all posted gains, according to the report, providing a buffer against the broader slowdown.

The figures arrive against a bleak backdrop for US industry. The Institute for Supply Management’s Manufacturing PMI registered 48.0 in July, its lowest reading in nine months and signaling a fifth straight month of sectoral contraction. Businesses appear to be delaying major capital expenditures, a sign of mounting caution amid persistent macroeconomic headwinds. Elevated input costs and an average effective tariff rate of 20%—a level not seen since the pre-World War II era—continue to pressure manufacturer margins and sentiment.

Efforts to reach officials for further comment on the data were not immediately successful. The report also showed a slip in consumer confidence to its lowest level since 2021, with more respondents stating that jobs are "hard to get." This aligns with the ISM’s employment index, which also showed further contraction, hinting at potential employment insecurity within the sector.

While the broader U.S. economy continues to expand, the industrial sector’s contraction is contributing to concerns about a more pronounced slowdown. This latest decline marks the steepest contraction since October 2024. Analysts warn the trend may signal more than a temporary dip, pointing to a possible deeper structural transformation as firms delay investment and hiring. The short-term outlook remains weak, though sectors outside of transportation may provide some stabilization if supply chains continue to recover.