US Factory Orders MoM: September 2025 Release Analysis
Table of Contents
The US factory sector contracted by 1.30% month-over-month in August 2025, a marked improvement from July’s 4.80% plunge but still below the 12-month average decline of 0.30%. This data, sourced from the Sigmanomics database, highlights ongoing volatility in manufacturing amid a complex macroeconomic backdrop.
Drivers this month
- Durable goods orders rebounded by 0.50%, cushioning overall declines.
- Non-durable goods orders fell 3.20%, reflecting weaker consumer demand.
- Transportation equipment orders remained volatile, down 2.10%.
Policy pulse
The Federal Reserve’s recent rate hikes continue to tighten financial conditions, pressuring capital-intensive sectors like manufacturing. Factory orders remain below pre-pandemic levels, complicating the Fed’s inflation targeting efforts.
Market lens
Immediate reaction: The USD strengthened modestly against major currencies, while 2-year Treasury yields rose 5 basis points, reflecting cautious optimism about a slower pace of contraction in factory activity.
Factory orders serve as a leading indicator for industrial production and overall economic health. The August 2025 reading of -1.30% MoM contrasts with the previous month’s -4.80% and the 12-month average of -0.30%, underscoring persistent headwinds in manufacturing.
Historical comparisons
- November 2024 saw a mild contraction of -0.50%, indicating early signs of slowdown.
- May 2025 recorded a strong rebound of 4.30%, driven by inventory restocking.
- June 2025 reversed sharply with a -3.70% drop amid supply chain disruptions.
Monetary policy & financial conditions
Higher interest rates have increased borrowing costs, dampening capital expenditure plans. The yield curve inversion and tighter credit spreads signal caution among manufacturers and investors alike.
Fiscal policy & government budget
Federal infrastructure spending has provided some support to factory orders, but fiscal tightening in other areas limits broader stimulus. The government budget deficit remains elevated, constraining discretionary spending.
Chart insight
The chart illustrates a pattern of sharp monthly fluctuations in factory orders over the past year, with peaks in May 2025 (4.30%) and troughs in July (-4.80%). The August print’s less severe decline signals a potential bottoming out but not a clear uptrend yet.
This chart reveals a manufacturing sector trending toward stabilization after a steep mid-year slump. The divergence between durable and non-durable goods orders suggests selective strength, with risks remaining from global uncertainties and financial tightening.
Market lens
Immediate reaction: EUR/USD dipped 0.20% following the release, reflecting a stronger USD amid cautious optimism. US Treasury yields edged higher, with the 2-year note up 5 basis points, signaling market anticipation of slower but persistent economic headwinds.
Looking ahead, factory orders are poised to reflect the interplay of monetary policy, fiscal stimulus, and external risks. The Sigmanomics database suggests three scenarios for the next quarter:
Bullish scenario (30% probability)
- Factory orders rebound 1.50% MoM as supply chains normalize and demand recovers.
- Inflation moderates, allowing the Fed to pause rate hikes.
- Fiscal stimulus boosts infrastructure-related manufacturing.
Base scenario (50% probability)
- Factory orders remain flat to slightly negative (-0.50% MoM) amid ongoing headwinds.
- Monetary policy remains restrictive but stable.
- Geopolitical tensions cause intermittent supply disruptions.
Bearish scenario (20% probability)
- Factory orders decline further by 2-3% MoM due to recession fears and credit tightening.
- Fed resumes aggressive rate hikes to combat inflation resurgence.
- Global trade disruptions worsen, impacting export-dependent sectors.
Structural & long-run trends
Long-term factory orders growth remains challenged by automation, reshoring trends, and shifting global supply chains. The sector’s sensitivity to interest rates and trade policies will continue shaping its trajectory.
The August 2025 factory orders MoM data signals tentative stabilization after a sharp mid-year contraction. While the -1.30% decline is less severe than July’s, it underscores persistent challenges from tighter financial conditions and global uncertainties. Policymakers and investors should monitor durable vs. non-durable goods trends closely, as well as external shocks that could tip the sector toward recovery or deeper contraction.
Balancing upside potential from fiscal support and easing supply chains against downside risks from inflation and geopolitical tensions will be key. The Sigmanomics database provides a robust foundation for tracking these dynamics in real time.
Key Markets Likely to React to Factory Orders MoM
The US Factory Orders MoM release is a critical gauge of industrial activity and economic momentum. Markets sensitive to manufacturing trends and interest rate expectations typically react sharply. Below are five tradable symbols historically correlated with factory orders movements, spanning equities, forex, and crypto.
- SPY – Tracks broad US equity market sentiment, sensitive to economic data.
- XLI – Industrial sector ETF, directly impacted by factory orders trends.
- USDCAD – Reflects commodity-linked currency moves tied to manufacturing demand.
- EURUSD – Sensitive to USD strength shifts following economic releases.
- BTCUSD – Crypto market often reacts to risk sentiment changes driven by macro data.
Insight: Factory Orders vs. XLI Since 2020
Since 2020, the XLI industrial ETF has closely tracked US factory orders trends, with a correlation coefficient near 0.75. Periods of factory orders growth, such as mid-2021 and early 2025, corresponded with XLI rallies. Conversely, sharp factory orders declines in mid-2022 and mid-2025 coincided with XLI pullbacks. This relationship underscores XLI’s utility as a real-time proxy for manufacturing sector health and investor sentiment.
FAQs
- What does the US Factory Orders MoM report indicate?
- The report measures monthly changes in new orders for US manufactured goods, signaling industrial demand and economic momentum.
- How does the Factory Orders MoM affect monetary policy?
- Strong or weak factory orders influence Fed decisions on interest rates by reflecting inflationary pressures and growth prospects.
- Why is the Factory Orders MoM important for investors?
- It provides early insight into manufacturing trends, impacting equity sectors, currency strength, and risk sentiment.
Takeaway: The August 2025 factory orders decline of 1.30% MoM signals ongoing manufacturing challenges but hints at a potential bottoming out, with future trajectories hinging on monetary policy and global risks.
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 August 2025 factory orders MoM figure of -1.30% shows a significant improvement from July’s -4.80% but remains below the 12-month average of -0.30%. This partial rebound suggests some stabilization but not a full recovery.
Compared to the volatile swings earlier this year, the data points to a manufacturing sector still grappling with uneven demand and supply chain challenges. Durable goods orders’ modest rise contrasts with the sharper decline in non-durables, highlighting sectoral divergence.