Durable Goods Fly Higher On Aircraft Orders

A jump in aircraft skewed durable goods orders 1.3 percent higher in November which however is well below Econoday's consensus for 2.0 percent and no better than the low estimate. Orders for civilian aircraft, which have been solid this year, rose 31 percent and reflect Boeing's success at November's Dubai Air Show. But when excluding aircraft and other transportation equipment, orders slipped 0.1 percent in a drop offset however by a large upward revision to October's ex-transportation reading which now stands at a very strong 1.3 percent.

Weakness in the latest month and an upward revision to the prior month is also the story for core capital goods orders (nondefense ex-aircraft) which also slipped 0.1 percent in November but with October now up an impressive 0.8 percent. Shipments of core capital goods, which will be part of the business spending component of fourth-quarter GDP, are only moderate, up 0.2 percent and 0.3 percent in November and October respectively.

Both vehicle orders and vehicle shipments have been strong the past two reports, up 1.4 percent for each in November following 1.6 percent gains for each in October. Orders for electrical equipment, reflecting demand for both capital goods and construction, have also been strong as have orders and shipments for primary metals. Orders for machinery, computers and defense aircraft have been mixed.

Other data include a strong 1.0 percent rise in total shipments against only a 0.2 percent build for inventories which drives down the inventory-to-shipments ratio to a yet leaner 1.66 from 1.67. Low inventories in times of expanding demand are a positive for the production and employment outlooks. A disappointment in the report, as it has been all year, are unfilled orders which managed to inch only 0.1 percent in the month.

This is very much like this morning's personal income & outlays report, mostly strong but still not as strong as expected and with weak spots here and there. And like last week's release of the 0.2 percent gain for November manufacturing production, the data are pointing to a favorable but perhaps still moderate factory contribution to the fourth-quarter economy.

Recent History Of This Indicator:
Boeing orders from Dubai's air show are expected to help lift durable goods orders in November where the consensus calls for a 2.0 percent gain that would resume, after October's 0.8 percent dip, what had been a late-year burst of strength for the factory sector. Excluding transportation equipment, orders are expected to show less strength but at a still very solid 0.5 percent increase while core capital goods orders are expected to bounce back from an October decline with a 0.4 percent gain.