The manufacturing sector's going strong despite war, high energy costs, and tariffs

The Census Bureau released data Monday morning that provides some insight into the state of manufacturing. It found that new orders of manufactured goods were up 1.5% in March from the month prior. Other recent data found that orders rose in April, as well.

Despite all of the uncertainty surrounding the war, energy costs, and (of course) tariffs, which have not gone away. So why has the manufacturing sector been so upbeat lately?

One category where orders have been especially strong is electronics. “That category includes computers, computer storage devices, peripheral equipment,” explained Tim Quinlan, senior economist at Wells Fargo.

Orders of those kinds of goods are typical of business spending in general right now, he said, “where everything that’s even tangentially related to this AI buildout is seeing a bid in activity.”

And electronics isn’t the only source of strength in manufacturing.

“There were a number of other categories — from machinery, to fabricated metals, and wood products — that all saw modest increases in this morning’s report,” Quinlan added.

That could be because manufacturers are catching up after the president’s tariffs unleashed all of that uncertainty last year, said Scott Paul, president of the Alliance for American Manufacturing.

“I do think that some of this is delayed demand that might have been sitting on the table for a while. And I do think there is a bit more certainty now,” he said.

After the Supreme Court struck down some of the president’s tariffs, Paul said businesses have at least a slightly clearer picture of where tariff policy is headed.

“And otherwise, the fundamentals of the U.S. economy — setting aside, of course, energy prices and the situation with Iran — look pretty good,” he said.

It’s also possible that the situation in Iran caused new orders to pick up, noted Kathy Bostjancic, chief economist at Nationwide.

“I think some companies tried to get ahead of potential price increases and disruptions to supply chains, and tried to pull in as many goods as they can,” she said.

On the other hand, Bostjancic said high energy prices, thanks to the war, could also be holding back demand, “because that means higher input costs. That is a headwind.”

And that means that if the war were to end, demand for manufactured goods would rise even faster.