• US factory orders rose a modest 0.2% in September, a significant deceleration from the previous month's 1.4% gain.
  • The closely watched durable goods segment, which measures orders for long-lasting items, increased 0.5%, matching expectations but slowing sharply from August's revised 3.0% surge.
  • Underlying data reveals a split picture: business investment in core capital goods remains robust, while transportation and automotive sectors show clear signs of strain.

New orders for manufactured goods posted a tepid increase in September, according to data released in late November, suggesting the industrial sector's momentum is cooling as it enters the final quarter of the year. The headline 0.2% rise in total factory orders marks a notable slowdown, while the 0.5% gain in durable goods—a key indicator of business confidence—represents the second consecutive month of growth but at a much-reduced pace.

The details within the report paint a more nuanced picture. Business investment, a critical driver of economic growth, held up relatively well. New orders for nondefense capital goods excluding aircraft, a proxy for future business spending, rose a solid 0.9% in September. This suggests that, despite broader headwinds, corporate America continues to invest, particularly in areas like technology and infrastructure linked to artificial intelligence data centers.

"The core capital goods number is the real story here," said one economist familiar with the data, who spoke on condition of anonymity. "It signals that underlying business investment sentiment hasn't cracked, even as some consumer-facing segments like autos are hitting a wall."

That wall is evident in the transportation sector. Orders for transportation equipment, which had surged 8.0% in August, managed only a 0.4% increase in September. The motor vehicles and parts component was particularly weak, rising just 0.4%—its softest performance since April. Industry sources point to a toxic mix of still-high loan rates following the Federal Reserve's initial cut and the expiration of federal electric vehicle tax credits as key factors dampening demand.

Bright spots emerged elsewhere. Orders for electrical equipment, appliances, and components jumped 1.5%, a move analysts attribute directly to soaring electricity demand from AI infrastructure and grid modernization projects. Primary metals also saw a strong 1.4% increase, a trend bolstered by a shift toward domestic sourcing over imports.

The broader health of the manufacturing sector appears stable, if not booming. Unfilled orders for durable goods, a measure of order backlogs, grew 0.7% for the second month in a row, indicating underlying demand remains healthy. Meanwhile, inventories across the factory sector edged down 0.1%, suggesting businesses are managing their stockpiles carefully rather than facing an unexpected glut.

Efforts to reach officials at the Department of Commerce for additional comment on the revisions were not immediately successful. The data arrives as manufacturers navigate a complex policy landscape, balancing the price pressures from tariffs with new tax incentives that allow for 100% depreciation of certain investments. The September figures suggest this balancing act is ongoing, with the technology and industrial sectors faring better than those more exposed to consumer financing costs.