Durable Goods Orders

The November rebound in new orders was broad-based outside of transportation. Sizeable gains were seen in communication equipment, up 4.0 percent, computers & electronics, up 3.7 percent; machinery, up 3.5 percent; and electrical equipment, up 3.2 percent. Also posting gains were primary metals and fabricated metals.

Transportation fell 5.5 percent after slipping 0.2 percent in October. Within transportation, nondefense aircraft dropped 32.6 percent in November; defense aircraft fell 3.2 percent; and motor vehicles slipped 0.2 percent.

The outlook for capital goods spending is improving at the core level-although it may be foreign spending more than domestic investment. However, headline new orders for nondefense capital goods fell 1.9 percent in November after an increase of 0.8 percent the previous month. The weakness was in the volatile aircraft component. Excluding aircraft, new orders for nondefense capital goods rebounded 2.9 percent after a 2.0 percent dip in October. These numbers reflect orders from both foreign and U.S. businesses.

Year-on-year, overall new orders for durable goods improved to minus 7.8 percent in November from minus 11.7 percent the month before. Excluding transportation, new durables orders increased to minus 6.9 percent from down 10.5 percent in October.

Overall, today’s durables report shows manufacturing still on a gradual uptrend. Growth in this sector is leading the economy but at a moderate pace.

Equities might be disappointed in the shortfall from expectation other than jobless claims fell more sharply than projected. Equities will likely rise on that report. However, Treasury yields were marginally lower on the two releases.

Jobless Claims