Durable Goods Orders Nearly Double Estimates

Aircraft and vehicles fed a very strong 2.9 percent jump in December durable goods orders which is nearly double Econoday's high estimate for 1.5 percent. But when excluding transportation equipment, durable orders only hit expectations with a 0.6 percent gain. And when looking at core capital goods orders (nondefense ex-aircraft) a bit of weakness appears with a 0.3 percent dip.

Looking first at strengths, civilian aircraft orders managed to rise 1.5 percent despite an enormously difficult comparison with November's 24.4 percent surge that was tied to Boeing's success at the Dubai Air Show. Vehicle orders extended their positive run with a 0.4 percent gain following 2.0 percent and 1.5 percent increases in the two prior months. Orders for primary metals, fabrications, and also, despite the weakness in capital goods, machinery all show strong gains.

The weakness for capital goods comes from computers, electrical equipment and especially communications equipment which has posted two straight sharp declines, at 3.2 percent and 6.1 percent. But looking at shipments of core capital goods, they were very positive with a 0.6 percent gain in the month which are reflected in the solid showing for nonresidential fixed investment in this morning's fourth-quarter GDP report.

But the dip in core capital goods orders does point to a slow start for first-quarter business investment. Nevertheless this report, which also includes upward revisions to November, points to a factory sector that is being driven by aircraft and vehicles and which is humming along nicely.

Recent History Of This Indicator:
Durable goods orders are often bumpy but forecasters, despite a hard comparison with November's jump in aircraft orders, do not see a downswing in December. On the contrary, Econoday's consensus for durable goods orders is a 0.6 percent gain with ex-transportation also seen up a solid 0.6 percent and core capital goods orders seen up 0.5 percent.