Aircraft drag on durable orders

December 23, 2025

October durable goods orders fell 2.2% after a modestly revised 0.7% rise in September. October’s decline defied the consensus forecast of a 1.5% decrease. Excluding transportation, durable goods orders edged higher, just 0.2%, after adding 0.7% in the prior month.

Transportation orders fell 6.5%, pulled lower by a 20.1% drop in civilian aircraft orders. The largest American aircraft maker reported 164 new orders for planes in November, boosted by 65 new orders from a major international customer at the Dubai Airshow. November headline durable goods orders will show a strong lift from those orders.

Orders for motor vehicles and parts posted a tepid 0.1% increase after rising 0.6% or more in the prior five months. The expiration of federal tax credits for electric vehicles at the end of September sapped vehicle demand as we entered the third quarter. One of the Detroit three big automakers recently pulled the plug on the electric version of its full-sized pickup truck. The gas version is its best-selling vehicle but the EV version consistently fell short of sales targets.

Affordability continues to be a major concern for shoppers as the average transaction price of a new vehicle recently crossed the $50,000 mark. Although the Federal Reserve enacted its third interest rate reduction since September, we believe the Fed will be more reluctant to cut rates in the first half of 2026 due to elevated inflation. This means potential relief via lower financing rates could be on pause in the early part of the new year. Vehicle loan rates have remained elevated due to tighter underwriting standards.

October’s report showed mixed results among industries. Orders for computers and electronic products rose 1% after rising 1.2% in September, machinery orders increased 0.8% and fabricated metals orders added 0.5%.

Orders for electrical equipment fell 1.5%, posting a rare decline, the first drop since March. September’s electrical equipment orders reached a record high, boosted by data center construction. The backlog on data centers is still substantial, but gains are slowing as the base level of construction has moved up.

Debt issuance for data center construction picked up in the fourth quarter, which suggests that less will come from cashflow alone in 2026. That has sparked concern among some investors.

Nondefense capital goods shipments excluding aircraft, which is used as an input for business spending in the current quarter, increased 0.7% in October after rising 1.2% in September. A related measure, core orders, which represents a proxy for capital spending and reflects business sentiment, notched the fourth consecutive gain in October. Nondefense capital goods orders excluding aircraft slowed to a 0.5% gain after posting a 1.1% increase in September. The restoration of bonus depreciation in the tax and spending package, which allows 100% depreciation of new investments, is accruing mostly to the tech sector and companies building data centers.

In the third quarter, nonresidential investment rose at a 2.8% annualized pace, down from 7.3% in the third quarter. Today's data suggest it likely accelerated in the fourth quarter, with gains in the most protected industries, notably steel. The rest of manufacturing remains lackluster. The agricultural sector has taken a beating as well, which is exacting a toll on spending for farm equipment.