US Durable Goods Orders Dec P: 5.6% (est 2.5%; R prev -1.7%)
Durable goods orders shoot higher on aircraft orders. Ex-transportation slight decline but a tenth better than expectations. Core biz spending though remains negative m/m.
US Durable Goods Orders Dec P: 5.6% (est 2.5%; R prev -1.7%)
-Durables Ex-Transportation Dec P: -0.1% (est -0.2%; prev 0.1%)
durgd.pdf (census.gov)
All numbers are m/m unless otherwise noted. Durable good are those meant to last at least 3 years. Numbers are not adjusted for inflation.
Durable goods new orders (orders for goods meant to last at least three years) jumped by 5.6% in December more than reversing November’s -1.7% decline. This was well above estimates for a gain of 2.5%. While November was burdened by a big drop in aircraft orders (-30.7%), December was boosted by a huge increase (+115.5%). Stripping those out saw new orders fall slightly by -0.1% after increases of +0.1% ex-transportation the prior two months. This was a tenth of a percent above expectations. Y/y headline orders are up 10.5%, the same as November, ex-transp +6.3%, so we remain a healthy amount above year-ago levels even if inflation is taken into account.
Transportation equipment on the back of those aircraft orders increased 16.7% after falling -5.0% in November. The number was also boosted by increases in defense aircraft (+15.2%) and autos (+0.7%).
Outside of transportation, areas were mixed with gains seen in fabricated metal products, communications equipment, and electrical equipment and appliances.
Turning to shipments, headline shipments were up +0.5% in December, the 19th increase in the last 21 months. Transportation equipment, up fourteen of the last fifteen months, drove the increase, $1.5 billion or 1.7 percent to $93.8 billion. Ex-transportation shipments fell -0.1% for a second month. Shipments are up 10.7% from the same period last year, and 8.7% ex-transp. These are also solid advances.
Backlogs (unfilled orders) increased for the 28th consecutive month by 1.3%. Transportation equipment, up twenty-two of the last twenty-three months, led the increase, $14.3 billion or 2.1 percent to $685.0 billion. Backlogs are up 7.3% y/y.
Inventories up twenty-three consecutive months, increased $3.5 billion or 0.7 percent to $493.6 billion. Transportation equipment, up two consecutive months, led the increase, $1.7 billion or 1.1 percent to $158.6 billion. Inventories are up 5.7% y/y.
Turning to what I think may be the most important part of the report, capital goods orders (which are goods used for production as opposed to consumption so are investments in future production), the headline number was very strong due to boost from aircraft noted above, increasing 15.8% after falling -4.5% in November (revised up from -5.5%). But as we saw with the headline durable goods number, stripping out aircraft (and defense orders which fell -2.8%) (so "core" capital goods orders which are a proxy for business cap ex) we saw a decline of -0.2% after a flat read in November. This was the third decline in the past four months after 28 months of consecutive increases. They do remain though up 8.3% y/y. This is a very important economic indicator in my opinion. As noted, these had been very strong since the pandemic up until four months ago. Since then though we’ve seen three of the four months negative m/m, so it seems clear this economic data point is evidencing a slowing in the economy.
Core capital goods shipments (a figure that went into 4th quarter GDP as equipment investment) fell back by -0.4% after falling -0.2% in November, so that was a drag on GDP as we saw in that report today. Core capital goods shipments are up 10.8% y/y.
So, overall, a positive to see the big investment in aircraft, but definitely not great to see the declines elsewhere, particularly the key core business orders component. As noted in my report on 4Q GDP today, that has now turned into a detractor from economic growth. Overall this data series has consistently remained in better shape than much of the other manufacturing data, and overall that remains true this month, but aircraft orders can support things only so far.
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