Durable Goods Orders Higher On Aircraft Group

A swing higher for the always volatile aircraft group gave an outsized lift to durable goods orders in November, rising 0.8 percent but still under consensus for 1.4 percent. When excluding aircraft and other transportation equipment, durable goods orders fell 0.3 percent which is near Econoday's low-end expectations. Under low-end expectations are core capital goods orders (nondefense ex-aircraft) which fell 0.6 percent in the month.

Aircraft orders, both civilian and defense, reversed two prior months of steep declines, rising 17.7 percent for the former and 15.4 percent for the latter. Primary metals at 1.0 percent, fabrications at 0.5 percent, and communications equipment at 0.8 percent all posted solid monthly gains.

Elsewhere, however, orders were weak with electrical equipment down 0.7 percent, computers unchanged, and motor vehicles down 0.2 percent. The biggest disappointment, and the heart of the capital goods group, is machinery where November orders sank a very steep 1.7 percent.

The drop in capital good orders is offset, however, by a large 5-tenths upward revision to October which now stands at plus 0.5 percent. And the upward October revision also includes core shipments which are inputs into GDP business investment and which now jumped 0.8 percent in the month in what is also a 5-tenths upward revision. Yet shipments for November, like orders, were weak at minus 0.1 percent.

Unfilled orders are another weakness, falling 0.1 percent after dipping 0.2 percent in October. Total shipments bounced back with a 0.7 percent November gain that follows a 0.4 percent decline with inventories up 0.3 and 0.2 percent in the two months. November's build relative to shipments is favorable, drawing back the inventory-to-shipments ratio to a leaner 1.61 from 1.62.

Certainly much of the news in today's report is favorable though the dip in the ex-transportation reading and turn lower for capital goods do echo last week's industrial production report, all pointing to a factory sector that may be loosing a little steam going into year end.