U.S. June Core Factory Orders Post Surprise Sharp Decline, Marking Largest Monthly Drop of the Year
Taylor Wilson
U.S. core factory orders fell 0.4% month-on-month in June, sharply missing the expected +0.4% gain and marking the steepest monthly drop this year; the decline clashes with manufacturing PMI hitting a four-year high, exposing a widening split inside the sector along AI versus non-AI lines.
How bad was the miss?
Headline factory orders fell 0.3% m/m, against expectations of a 0.2% gain — the second straight monthly decline. Year-on-year growth held at 7.4%.
Core orders — factory orders excluding transportation, a cleaner read on underlying demand — dropped 0.4% m/m, the largest single-month decline since April.
Orders excluding defense also fell 0.4%, down for a second consecutive month. This means → no matter which volatile component you strip out, underlying manufacturing demand is softening.
Why is PMI telling the opposite story?
Manufacturing PMI just climbed to a four-year high, signaling robust expansion — yet hard data like factory orders keep sliding.
In plain terms = PMI is a sentiment score from plant managers; factory orders are actual purchase commitments. Managers feel optimistic, but real orders are shrinking.
This reflects a structural split inside manufacturing: the best-performing sectors are so strong they pull the survey average up, masking broad weakness elsewhere.
Who is expanding and who is contracting?
According to ISM survey respondents, AI, semiconductors, electronics, and machinery are seeing strong orders, driven by AI data-center buildouts, chip demand, and defense spending.
Metals, transportation, chemicals, and consumer goods face weak demand, rising tariff costs, and pricing confusion.
This means → the manufacturing boom is not broad-based recovery — it is AI supply chains and defense dragging the rest of the sector forward.
What to watch next?
The key question is whether strong AI and defense demand can spread to other industries.
If it spreads, the gap between hard data and survey data will narrow. If it does not, PMI's four-year high is a misleading signal.
Put simply = a handful of sectors are carrying the entire scorecard right now — the test is whether the top performers can lift the laggards.
Content is for reference only, not financial advice.