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Durable Goods Orders: Volatile Aircraft Orders Mask Improving Trend

January 27, 2017
Bottom Line: Durable goods orders fell again in December due to high volatility in aircraft orders, evidenced by only 13 Boeing aircraft orders in November versus 290 in December but a sharp decline in defense aircraft orders in December. Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are modestly above their Q3 level, suggesting that capital spending made a small positive contribution to Q4 GDP growth, as we saw in today's preliminary 4Q GDP report. Additionally, this key metric finished 2016 UP 0.7% compared to DOWN 7.1% and UP 1.4% in 2014. Overall, looking at 2016, hardgood orders increased at a 1.6% annualized rate compared to a decline of 0.8% in 2015 and a decline of 1.7% in 2014.

Durable Goods Orders FELL by 0.4% in December, compared with market expectations for a gain of 2.5%. Moreover, the prior month was revised lower from -4.6%to -4.8%.

Transportation Orders FELL by 2.2% with civilian aircraft orders climbing by 42.4% while motor vehicle orders climbed by 2.0%. Ex-transportation orders ROSE by 0.5%.

Computers and electronic products and "all other" durable goods increased while primary metals, and fabricated metal products declined.

Core Durable Goods Orders, those excluding both civilian aircraft and defense, ROSE by 0.9% and are 3.6% ABOVE their year ago level.

Nondefense Capital Goods Shipments ROSE. Including civilian aircraft, they ROSE by 1.8% and excluding them they ROSE by 1.0%

Durable manufacturing inventories were UNCHANGED.

Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are modestly above their Q3 level, suggesting that capital spending will likely made a small positive contribution to Q4 GDP growth, as we saw in today's preliminary GDP report.