Durable Goods

January 27th, 2017 1:18 pm | by John Jansen |

Via Stephen Stanley at Amherst Pierpont Securities:

The headline December durable goods orders figure was disappointing, as both defense and aircraft bookings were softer than expected.  Defense orders more than reversed the 30% jump recorded in November, falling to the lowest level since June.  Aircraft bookings were projected to improve substantially, based on Boeing data, but in fact the tally only posted a tepid rebound.  As a result, overall durable goods orders slipped by 0.4%.  However, the various “core” measures were all better than I had expected.  Excluding the two noisy categories detailed above, orders advanced by 0.9% on top of November’s 1.1% gain (previously reported +0.7%).  In fact, December marks the seventh straight monthly increase for the ex-defense and aircraft measure, the longest such string since the early days of the expansion.  Similarly, the ex-transportation figure rose by 0.5% in December, a sixth straight increase.

The business investment outlook is beginning to perk up.  Core capital goods orders were up by 0.8% on top of November’s 1.5% advance (revised from 0.9%).  This gauge had fallen in 5 out of 7 months through May but has now moved higher in 6 of the most recent 7 months.  Core capital goods shipments seem to have turned the corner as well, surging by 1.0% in December on the back of November’s 0.6% rise.  The modest advance in the business equipment spending component of GDP in Q4 after four straight quarterly declines confirms the upturn.  As noted in the GDP discussion, I expect a friendlier policy environment to spur an acceleration in investment outlays in 2017, though the full unleashing of pent-up activity may not come until corporate tax reform makes its way through Congress.

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