US Factory Orders ex Transportation: December 2025 Report and Macro Outlook
Table of Contents
The latest US Factory Orders ex Transportation data, released on December 4, 2025, showed a 0.20% month-over-month increase, surpassing the 0.10% consensus forecast and reversing November’s 0.10% decline. This indicator, which strips out the volatile transportation sector, offers a clearer view of underlying manufacturing demand. The 12-month average growth rate is 0.22%, signaling moderate expansion in factory activity over the past year.
Drivers this month
- Durable goods orders rose, reflecting stronger machinery and equipment demand.
- Non-durable goods showed modest gains, led by chemicals and plastics.
- Supply chain normalization contributed to smoother production schedules.
Policy pulse
The reading sits above the Federal Reserve’s neutral growth threshold, suggesting some resilience despite ongoing monetary tightening. Inflation remains above target, but factory orders growth supports the Fed’s cautious stance on rate hikes.
Market lens
Immediate reaction: The US dollar index (DXY) edged up 0.10% post-release, while 2-year Treasury yields rose 3 basis points, reflecting modest hawkish sentiment. Equity markets showed little change, indicating a wait-and-see approach.
Factory Orders ex Transportation is a core macroeconomic indicator reflecting manufacturing sector health, excluding the often-volatile transportation segment. It correlates closely with industrial production, capacity utilization, and business investment trends. The 0.20% increase in December contrasts with the -0.10% contraction in November and aligns with the 0.30% average monthly growth seen in early 2025.
Historical comparisons
- February 2025 saw a 0.30% rise, the highest monthly gain this year.
- June 2025 recorded a -0.50% decline amid supply chain disruptions.
- September 2025 posted a 0.60% increase, the strongest since April.
Monetary policy & financial conditions
The Federal Reserve’s ongoing rate hikes have tightened financial conditions, with the effective federal funds rate near 5.25%. Despite this, factory orders growth suggests manufacturing is absorbing higher borrowing costs without sharp contraction. Credit spreads remain stable, supporting capital investment.
Fiscal policy & government budget
Recent fiscal measures, including infrastructure spending and targeted tax incentives, have bolstered industrial demand. The government budget deficit remains elevated but manageable, with stimulus supporting manufacturing capital expenditures.
This chart confirms a recovery trend after mid-year volatility, with factory orders trending upward. The data suggests manufacturing is adapting to tighter financial conditions and external shocks, supporting a cautiously optimistic outlook for industrial activity.
Market lens
Immediate reaction: The S&P 500 futures dipped 0.10% briefly but recovered, reflecting investor caution amid mixed signals. The US dollar strengthened slightly, while industrial metals prices rose, indicating expectations of sustained manufacturing demand.
Looking ahead, factory orders ex transportation face a complex macro backdrop. The Federal Reserve’s monetary policy will remain a key determinant, with potential rate pauses or cuts dependent on inflation trajectories. Fiscal stimulus and infrastructure projects provide upside support, while global geopolitical risks and supply chain uncertainties pose downside threats.
Bullish scenario (30% probability)
- Inflation moderates faster than expected, prompting Fed rate cuts.
- Supply chains fully normalize, boosting production efficiency.
- Strong domestic demand and fiscal stimulus drive factory orders growth above 0.40% monthly.
Base scenario (50% probability)
- Monetary policy remains steady with gradual tightening.
- Factory orders grow modestly around 0.20% monthly, consistent with recent trends.
- Geopolitical tensions persist but do not escalate materially.
Bearish scenario (20% probability)
- Inflation surprises on the upside, forcing aggressive Fed hikes.
- Supply chain disruptions re-emerge due to geopolitical shocks.
- Factory orders contract, falling below -0.10% monthly, signaling manufacturing slowdown.
Structural & long-run trends
Long-term, US manufacturing faces challenges from automation, reshoring, and energy transition. Factory orders ex transportation will increasingly reflect shifts toward high-tech and green industries. Investment in advanced machinery and sustainable inputs is expected to accelerate.
The December 2025 Factory Orders ex Transportation report signals resilience in US manufacturing amid tightening financial conditions and external risks. The 0.20% gain surpasses expectations and suggests moderate expansion. However, uncertainties around inflation, monetary policy, and geopolitics warrant caution. Investors and policymakers should monitor upcoming data closely to gauge the sustainability of this recovery.
Overall, the manufacturing sector remains a vital barometer of economic health, with factory orders ex transportation providing a less volatile, more reliable signal of industrial demand trends.
Key Markets Likely to React to Factory Orders ex Transportation
Factory Orders ex Transportation data historically influences markets sensitive to industrial activity and economic growth. Equities in industrial sectors, the US dollar, and Treasury yields often respond to surprises in this indicator. Additionally, commodities tied to manufacturing inputs may see price shifts. Below are five tradable symbols with notable correlations to factory orders movements.
- DOW – Industrial-heavy index sensitive to manufacturing trends.
- BA – Boeing, a key transportation and manufacturing stock.
- USDCAD – Currency pair influenced by US manufacturing strength and commodity prices.
- BTCUSD – Bitcoin, often viewed as a risk sentiment barometer.
- GE – General Electric, a diversified industrial conglomerate.
Insight: Factory Orders ex Transportation vs. DOW Index Since 2020
Since 2020, monthly changes in Factory Orders ex Transportation have shown a positive correlation (~0.65) with the DOW index returns. Periods of factory orders growth above 0.30% often coincide with DOW rallies, while contractions align with market pullbacks. This relationship underscores the indicator’s value as a leading signal for industrial equity performance.
Frequently Asked Questions
- What is Factory Orders ex Transportation?
- Factory Orders ex Transportation measures manufacturing orders excluding the transportation sector, providing a clearer view of industrial demand.
- Why is this indicator important for the US economy?
- It reflects the health of manufacturing, a key driver of economic growth, business investment, and employment.
- How does Factory Orders ex Transportation affect financial markets?
- Surprises in this data influence equity indices, currency pairs like USDCAD, and Treasury yields by signaling economic momentum.
One Crisp Takeaway
The December 2025 Factory Orders ex Transportation rebound to 0.20% signals resilient US manufacturing, balancing monetary tightening and external risks, with cautious optimism warranted.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The December 2025 Factory Orders ex Transportation growth of 0.20% outpaced November’s -0.10% and aligns closely with the 12-month average of 0.22%. This rebound follows a volatile mid-year period marked by a -0.50% drop in June and a strong 0.60% gain in September.
Month-over-month gains have stabilized since the summer, reflecting improved supply chains and steady domestic demand. The chart below illustrates the monthly percentage changes over the past 12 months, highlighting the recent upward trend.