WASHINGTON (Reuters) – New orders for U.S.-manufactured goods rebounded in January amid a surge in commercial aircraft bookings, but the broader manufacturing sector’s recovery is likely to be hampered by tariffs on imports.
Factory orders increased 1.7% after a revised 0.6% decline in December, the Commerce Department’s Census Bureau said on Wednesday. Economists polled by Reuters had forecast factory orders increasing 1.6% after a previously reported 0.9% drop in December.
Factory orders advanced 3.5% on a year-on-year basis in January. Manufacturing, which accounts for 10.3% of the economy, has been showing tentative signs of recovery after being undercut by the Federal Reserve’s aggressive interest rate hikes in 2022 and 2023.
But a trade war, triggered by President Donald Trump’s new 25% tariffs on imports from Mexico and Canada, which took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%, is seen snuffing out the recovery.
Domestic manufacturers rely heavily on imported raw materials, and the duties are expected to increase production costs, which are then passed on to buyers of the finished products. An Institute for Supply Management survey on Monday showed fears about import levies dominated responses from manufacturers in February as well as discussions about who will pay for tariffs.
Civilian aircraft orders soared 93.9% in January after dropping 28.9% in December. Orders for motor vehicles and parts decreased 1.5%. Transportation equipment orders rebounded 9.9%. Excluding transportation equipment, factory orders gained 0.2%.
The government also reported that orders for non-defense capital goods excluding aircraft, seen as a measure of business spending plans on equipment, increased 0.8% in January as estimated last month. Shipments of core capital goods slipped 0.3% as previously reported.
Nondefense capital goods orders rebounded 12.8%, instead of the previously estimated 12.9%.
Business spending on equipment contracted in the fourth quarter after double-digit growth in the July-September quarter, weighed down by aircraft deliveries.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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