Despite solid fundamentals, sentiment in the U.S. manufacturing sector has mostly been informed by buzzy anxieties over economic growth.
Take durable goods, for example: After a surprising beat on new orders in January, analysts expected a correction in February. Instead, new orders for durable goods grew 0.9% month over month (m/m) against consensus expectations of a 1% m/m drop, while January’s growth was revised up to 3.3% m/m.
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Growth in February’s headline number came despite a 5% m/m drop in orders for nondefense aircraft – beleaguered aircraft manufacturer Boeing reported only 13 orders in February, down from 36 per month previously.
Excepting transportation orders, core durable goods orders were up 0.7% m/m: the category’s largest monthly jump since March 2022. And though new orders of core capital goods – a category used to calculate equipment investment for GDP – were down 0.3% m/m, shipments were up 0.9% m/m.
Similarly, factory orders, which reflect upstream demand for manufactured goods, were up 0.6% m/m in February, narrowly beating consensus expectations for 0.5% m/m growth. New orders from durable goods industries were even stronger, rising 1% m/m. According to the latest hard data, then, the U.S. manufacturing sector is in a good place.
Even so, tariffs are top of mind for U.S. manufacturers, as can be seen in the two most important sentiment indexes for the sector.
The S&P Global US Manufacturing Purchasing Managers’ Index suffered a notable decline in March, dropping to 50.2 from February’s 52.7. Although any reading above 50 does indicate expansion, the production subindex fell into contraction for the first time since December — potentially signaling an unwelcome inflection point in the sector’s nascent recovery.
“A combination of improved optimism surrounding the new administration and the need to front-run tariffs had buoyed the goods-producing sector in the first two months of the year,” wrote Chris Williamson, chief business economist at S&P Global Market Intelligence, “but cracks are now starting to appear.”
The difficulty in comparing so-called “hard” versus “soft” data is that sentiment influences decisions that will eventually bear out in the hard data.
“A key concern among manufacturers,” Williamson continued, “is the degree to which heightened uncertainty resulting from government policy changes, notably in relation to tariffs, causes customers to cancel or delay spending, and the extent to which costs are rising and supply chains deteriorating in this environment.
