Durable Goods

February 27th, 2017 9:00 am | by John Jansen |

Via Stephen Stanley at Amherst Pierpont Securities:

rable goods orders in January were not far from expectations.  The January changes were a bit weaker than projected, but there were upward revisions to December that were largely offsetting.  Given how volatile this dataset typically is, the January report is close enough to expectations that it does not really alter the big picture.

The headline orders gauge rose by 1.8%, very close to expectations, driven mainly (as forecast) by a sizable rebound in aircraft bookings.  Excluding the volatile defense and aircraft categories, orders were slightly better than I had expected, slipping by 0.1% in January, while December’s advance was revised higher by three-tenths.  Motor vehicle industry activity held up better than I had estimated based on the noticeable decline in assemblies last month.

In contrast, core capital goods orders were a touch softer than projected in January, falling by 0.4% (partially offset by a four-tenths upward revision to December).  The modest decline in January breaks a string of three straight monthly advances (and 6 out of 7), but the setback is modest.  Similarly, core capital goods shipments slid by 0.6% in January, but December’s level was revised higher by six tenths of a percentage point.  My view on business investment remains that there is a good deal of pent-up energy that had been held back by an adverse and uncertain policy environment.  The surge in business sentiment in recent months suggests that some of that energy is leaking out already, but my guess is that a full-on strengthening in investment will probably have to wait until there is greater resolution on some of the outstanding policy questions, particularly corporate tax reform (and within that, the proposed treatment of depreciation).  Today’s data is consistent with that big-picture view.  After a dismal 2015-2016, things may be slightly better for now, with the prospect of more significant improvement later in the year.

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