U.S. Durable Goods Orders Rebound in January, Driven by Transportation Surge

January’s durable goods orders showed a strong rebound, rising 3.1 percent after two months of declines, as transportation equipment orders surged. However, core orders were mixed, indicating a more uneven recovery across industries.

New Orders: Transportation Drives Headline Growth

New orders for manufactured durable goods increased by $8.7 billion, or 3.1 percent, to $286.0 billion, breaking a two-month losing streak. This followed a revised 1.8 percent decline in December, showing that demand remains resilient despite broader economic uncertainties.

Transportation equipment orders rose 9.8 percent to $96.5 billion, accounting for nearly the entire gain. This category had also seen two consecutive months of declines prior to this rebound. Excluding transportation, new orders were flat, suggesting weakness outside of major aircraft and vehicle purchases. Excluding defense, new orders rose 3.5 percent, reflecting a pickup in private-sector demand.

The sharp rebound in transportation orders was largely driven by nondefense aircraft and parts, which saw a 93.9 percent increase following a steep decline in December. This sector is volatile, often skewing the headline number. Meanwhile, motor vehicles and parts orders fell 2.5 percent, suggesting continued softness in the auto industry.

Shipments: Modest Growth with Transportation Leading

Shipments of durable goods increased 0.4 percent to $288.2 billion, marking the second consecutive month of gains.

Transportation equipment led the increase, rising 1.3 percent to $94.5 billion. Excluding transportation, shipments were flat, reinforcing the theme of uneven growth across sectors.

Nondefense aircraft and parts shipments jumped 18.3 percent, reflecting increased deliveries by major aerospace manufacturers such as Boeing. However, motor vehicle and parts shipments fell 2.7 percent, signaling continued production constraints and softer demand.

Capital Goods: Mixed Performance with Strong Nondefense Growth

Nondefense capital goods orders, a key proxy for business investment, surged 12.9 percent to $90.6 billion, suggesting that companies are still spending on long-term equipment despite higher interest rates.

Nondefense capital goods shipments rose 3.2 percent to $87.8 billion, indicating strong fulfillment of previous orders. Core capital goods (nondefense excluding aircraft) orders increased just 0.8 percent, which was weaker than expected and could point to cautious corporate investment outside of major aircraft purchases. Defense capital goods orders fell 1.5 percent to $14.4 billion, reflecting a slight pullback after recent growth in military-related spending.

Revisions to Prior Month

December’s data was revised upward, with new orders now reported at $277.3 billion, a 1.8 percent decline, compared to the prior estimate of $278.5 billion. Other key revisions included:

- Shipments remained unchanged at $286.9 billion.

- Unfilled orders were revised up slightly to $1,397.9 billion, a 0.3 percent decrease.

- Total inventories were revised lower to $862.8 billion, down 0.4 percent.

While the revisions were relatively minor, the upward adjustment to new orders slightly softens the previous month’s decline.

Sector Breakdown: Notable Movers

Top increases in new orders month-over-month included nondefense aircraft and parts, which jumped 93.9 percent, computers and related products, which rose 7.1 percent, and communications equipment, which increased 0.6 percent.

The largest declines came from motor vehicles and parts, which dropped 2.5 percent, fabricated metal products, which fell 1.2 percent, and all other durable goods, which declined 0.6 percent.

The aerospace sector, led by Boeing, saw a massive recovery, while automakers like Ford and General Motors faced weakness in vehicle orders.

Market Implications and Economic Outlook

The strong durable goods report suggests continued resilience in manufacturing, though growth remains uneven. The sharp rise in transportation orders, particularly in aircraft, skews the headline number, masking softness in key areas like autos and core capital goods.

Key takeaways for markets and the Federal Reserve include:

1. The transportation sector remains the biggest driver, but the broader manufacturing landscape is mixed.

2. Business investment in nondefense capital goods showed strength, which is encouraging for economic growth.

3. The Federal Reserve will likely view this as a positive sign for the economy, though core capital goods growth suggests businesses remain cautious.

4. Supply chain constraints and shifting demand patterns are still evident, particularly in auto manufacturing.

5. Equity investors should focus on transportation stocks like Boeing, defense contractors like Lockheed Martin, and industrial giants like General Electric.

With the next durable goods report set for release on March 26, 2025, investors will be watching to see if this growth trend holds or if economic headwinds lead to renewed declines.