U.S. Factory Orders Slip in December as Manufacturing Faces Uneven Demand

22 February 2026

harrison mcclary/Reuters

America’s manufacturing sector ended the year on a cautious note as new factory orders declined in December, reflecting uneven demand across industries and highlighting the challenges facing one of the country’s most important economic engines. The latest figures from the Commerce Department showed that orders for manufactured goods fell by 0.7 percent during the month, dropping to about $617.5 billion after a strong gain in November.

Factory orders are closely watched by economists and investors because they offer insight into the health of manufacturing activity and the broader economy. When businesses place orders for equipment, vehicles and machinery, it signals confidence in future demand and investment. A decline, even a modest one, can raise questions about whether economic momentum is slowing. In this case, the pullback came after a sharp 2.7 percent increase the previous month, suggesting that the December decline may reflect natural volatility rather than a sudden deterioration in industrial activity.

Much of the drop was driven by weakness in the durable goods category, which includes products designed to last at least three years such as aircraft, vehicles and industrial machinery. Orders for durable goods fell about 1.4 percent in December after a surge of more than 5 percent in November. Transportation equipment was the primary drag on the data, with orders in that sector falling sharply after an earlier spike.

A particularly significant factor was the volatile market for aircraft and aerospace equipment. Orders for nondefense aircraft and related parts plunged nearly 25 percent during the month, reversing an unusually strong surge seen in November. Because large aircraft orders can fluctuate dramatically from one month to the next, they often have an outsized effect on overall manufacturing statistics.

Outside of transportation equipment, the picture for manufacturers was somewhat more stable. Orders in several other sectors, including computers, electronics and metals, actually increased during the month. When transportation equipment is excluded from the calculations, factory orders rose modestly, suggesting that the broader manufacturing base remains relatively steady even as certain industries experience large swings.

Shipments of manufactured goods offered another encouraging sign. While orders declined, shipments rose by about 0.5 percent in December after slipping slightly the previous month. This indicates that factories continued delivering products to customers even as new orders slowed.

Another measure of manufacturing health, unfilled orders, also moved higher. Backlogs increased nearly 1 percent in December, marking the fifth consecutive monthly rise. Growing backlogs can signal that demand remains solid because companies still have work waiting to be completed.

Inventories of manufactured goods edged up slightly as well, increasing about 0.1 percent during the month. When shipments rise faster than inventories, it can suggest that manufacturers are gradually working through existing stockpiles rather than allowing them to accumulate. Economists often view this balance as an indicator of stability in supply chains and production planning.

The broader context of the manufacturing sector remains complex. While factory orders dipped in December, they were still higher compared with the previous year, reflecting ongoing demand for industrial products despite fluctuating monthly figures. At the same time, manufacturers continue to navigate challenges that include higher interest rates, changing global supply chains and uncertainty about future trade policies.

For policymakers and investors alike, the latest data reinforces a familiar theme in the post pandemic economy. Manufacturing activity is neither collapsing nor surging but instead moving through a period of uneven growth shaped by shifting demand and volatile industry specific factors. As the new year begins, the direction of factory orders will remain an important signal for understanding where the broader U.S. economy may be headed.