Strong Growth, Shaky Confidence

Why does this matter to you? Durable goods orders are purchases of big-ticket items like appliances, vehicles, and machinery. They signal whether businesses feel confident enough to invest in the future. When companies pull back, it often foreshadows slower hiring and economic growth. In October, these orders fell 2.2% to $307.4 billion, worse than the expected 1.5% decline and reversing September's gains. Aircraft orders drove most of the weakness, with nondefense aircraft plunging 20.1%. The silver lining: core capital goods orders, a proxy for business investment excluding volatile aircraft, rose 0.5%, suggesting companies haven't abandoned their spending plans entirely.

A growing economy typically means more jobs, rising wages, and greater confidence for household spending. Gross Domestic Product (GDP), the total value of all goods and services produced in the country, grew at an annualized rate of 4.3% in the third quarter of 2025, the fastest pace in two years and well above the 3.3% economists had predicted. Consumer spending, which accounts for roughly two-thirds of economic activity, jumped 3.5% as Americans increased purchases of both goods and services, particularly healthcare and travel. Exports surged 8.8%, rebounding sharply after declining in Q2, while imports fell 4.7%. Business investment in equipment and intellectual property remained positive, though investment in buildings and housing continued to contract. The Atlanta Fed's GDPNow model projects Q4 2025 growth at 3.0%, suggesting continued economic expansion though at a slower pace.

When factories produce more goods, it typically means more jobs, steadier prices on store shelves, and a healthier economy overall—which is why industrial production matters to your household budget. Industrial production—a measure of output from factories, mines, and utilities—rose 0.2% in November after dipping 0.1% in October. Manufacturing was flat in November following a 0.4% October decline, while mining and utilities posted net gains over the two-month period. Capacity utilization—the share of industrial capacity currently in use—held at 76.0%, remaining 3.5 percentage points below the long-run average. This gap suggests factories can ramp up output to meet demand without triggering the kind of supply shortages that push prices higher.

Consumer confidence fell for the fifth consecutive month in December, dropping to 89.1 and approaching the April low of 85.7 when tariffs first rolled out. The Present Situation Index, which captures how people view current business and job conditions, plunged 9.5 points to 116.8. Meanwhile, the Expectations Index (measuring optimism about the next six months) held at 70.7, marking eleven straight months below 80. That threshold has historically signaled recession risk. Survey respondents cited inflation, tariffs, and job market concerns as top worries. Notably, consumers' views of their family's current financial situation turned negative for the first time in nearly four years.

Initial jobless claims—the number of people filing for unemployment benefits for the first time—dropped to 214,000 for the week ending December 20th, the lowest reading since early 2024. The 4-week moving average, which smooths out weekly fluctuations, also declined to 216,750. However, continuing claims (people still receiving benefits week after week) rose for a second consecutive week to 1.92 million. This divergence reinforces the "No Fire, No Hire" pattern defining today's labor market: employers aren't laying off workers, but they're not adding new positions either. For job seekers, this means greater job security if you're currently employed, but a longer, more competitive search if you're looking for work.