The US Factory Orders MoM for December 2025 increased by 0.20%, falling short of the 0.50% consensus estimate and down from November’s 1.40% gain, according to the Sigmanomics database. This modest rise contrasts with the volatile manufacturing trends seen earlier in the year, including a sharp 4.30% surge in May and steep declines in June (-3.70%) and August (-4.80%). The 12-month average growth rate now stands at approximately 0.10%, underscoring a broadly sluggish manufacturing environment.

Drivers this month

• Durable goods orders contributed positively but at a slower pace than prior months.
• Supply chain normalization reduced backlog pressures, limiting upside.
• Energy sector orders remained flat amid volatile oil prices.

Policy pulse

The reading remains below the Federal Reserve’s preferred inflation and growth targets, reflecting the ongoing impact of monetary tightening. The Fed’s rate hikes since mid-2024 have increased borrowing costs, dampening capital expenditures in manufacturing.

Market lens

Immediate reaction: The USD strengthened modestly by 0.15% against major currencies, while the S&P 500 industrial sector dipped 0.30% within the first hour post-release, reflecting investor caution.

Factory Orders are a key leading indicator of manufacturing health and broader economic activity. The December print of 0.20% MoM contrasts with the prior month’s robust 1.40% gain but remains positive, signaling ongoing albeit slower expansion in factory activity. Compared to the first half of 2025, which saw sharp swings including a -4.80% drop in August, the current trend suggests stabilization.

Monetary Policy & Financial Conditions

The Federal Reserve’s cumulative 375 basis points rate hikes since early 2024 have tightened financial conditions. Higher interest rates have increased financing costs for manufacturers, contributing to the slowdown in orders. The yield on 2-year Treasuries rose to 5.10%, reflecting market expectations of sustained tight policy.

Fiscal Policy & Government Budget

Federal fiscal stimulus remains moderate, with infrastructure spending supporting some manufacturing segments. However, budget constraints and political gridlock limit additional fiscal boosts that could accelerate factory orders.

External Shocks & Geopolitical Risks

Lingering supply chain disruptions from Asia and geopolitical tensions in Eastern Europe continue to weigh on manufacturing inputs and export demand. These external shocks have contributed to volatility in factory orders throughout 2025.

Drivers this month

• Automotive and aerospace orders showed modest gains.
• Electronics orders declined slightly, reflecting global demand softness.
• Raw materials orders remained flat, indicating cautious inventory management.

Policy pulse

The subdued growth aligns with the Federal Reserve’s restrictive stance, as factory orders have historically slowed following rate hikes. The data supports the Fed’s cautious approach to further tightening.

Market lens

Immediate reaction: Industrial sector ETFs such as DIA dipped 0.30%, while the USD index rose 0.15%, reflecting risk-off sentiment and safe-haven demand.

Looking ahead, factory orders face a mixed outlook shaped by monetary policy, fiscal support, and external risks. The baseline scenario projects modest growth of 0.30% MoM over the next quarter, supported by easing supply chain constraints and stable domestic demand. This scenario carries a 55% probability.

The bullish scenario (20% probability) envisions a stronger rebound of 0.70% MoM, driven by renewed fiscal stimulus and easing geopolitical tensions, boosting export orders and capital investments.

The bearish scenario (25% probability) anticipates a contraction of -0.50% MoM, triggered by further Fed tightening, a sharp slowdown in global demand, or renewed supply chain disruptions.

Monetary Policy & Financial Conditions

Further Fed rate hikes could suppress factory orders, while a pause or cut could provide relief. Market-implied probabilities suggest a 40% chance of a rate pause in early 2026.

External Shocks & Geopolitical Risks

Resolution of trade disputes and geopolitical conflicts would improve export prospects. Conversely, escalation could deepen manufacturing headwinds.

Structural & Long-Run Trends

Automation and reshoring efforts may gradually support factory orders, but demographic shifts and global competition continue to pressure growth.

The December 2025 Factory Orders MoM data signals a manufacturing sector in cautious recovery but facing significant headwinds. The 0.20% increase, while positive, falls short of expectations and highlights the impact of tighter monetary policy and external uncertainties. Historical volatility underscores the sector’s sensitivity to macroeconomic shifts.

Investors and policymakers should monitor upcoming data releases closely, especially durable goods orders and industrial production, for confirmation of trends. The balance of risks leans slightly to the downside, but targeted fiscal measures and easing geopolitical tensions could improve the outlook.

Overall, factory orders remain a critical barometer for US economic health, reflecting the interplay of domestic policy, global conditions, and structural changes.

Key Markets Likely to React to Factory Orders MoM

Factory Orders data often influences industrial equities, currency pairs sensitive to US economic health, and commodities linked to manufacturing demand. Below are five tradable symbols historically correlated with factory orders movements, providing market participants with actionable insights.

• DIA – Tracks industrial sector performance sensitive to factory activity.
• BA – Boeing, a bellwether for aerospace manufacturing orders.
• USDCAD – Reflects commodity-linked currency movements tied to manufacturing demand.
• USDJPY – Sensitive to US monetary policy shifts impacting factory orders.
• BTCUSD – Cryptocurrency often reacts to risk sentiment shifts driven by economic data.

FAQs

What is the significance of the US Factory Orders MoM data?

The Factory Orders MoM data measures monthly changes in new orders for manufactured goods, indicating manufacturing sector health and future industrial activity.

How does Factory Orders MoM affect monetary policy?

Strong factory orders can signal economic growth, potentially prompting the Fed to tighten policy, while weak orders may encourage easing or pauses in rate hikes.

What are the main risks to the Factory Orders outlook?

Risks include further Fed tightening, global demand shocks, supply chain disruptions, and geopolitical tensions that could slow manufacturing activity.

Takeaway: The December 2025 Factory Orders MoM print underscores a cautious manufacturing recovery amid tightening financial conditions and external uncertainties. Monitoring upcoming data and policy signals will be crucial for navigating the evolving macro landscape.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.