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Factory Orders: Continued Improvement as Orders Beat Estimates

February 3, 2017

Bottom Line: Factory orders rose in December after falling in November. The 12-month annual rate of change is now 3.6% (partially due to base effects but also due to an improving trend). That contracts with contraction of over 4% in both 2015 and 2014. The inventory to shipment ratio fell sharply. Equipment spending added modestly to preliminary 4Q16 GDP -- however, this December data suggests a modest downward revision is likely.

Factory Orders ROSE by 1.3% in December, compared with market expectations for an increase of 0.5%. The prior month's loss was revised higher from -2.4% to -2.3%.

Durable goods orders declined by 0.5%, as previously reported, while nondurable goods orders jumped by 3.1%. Excluding orders for defense goods, civilian aircraft and petroleum products, (so called) core factory orders were nearly unchanged.

Factory orders are now 3.6% ABOVE their year ago level but the year-over-year growth rate has rose moderately over the past year (from -4.3% a year ago to the current 3.6%).

The Q4 average for nondefense capital goods shipments is slightly below its Q3 level, compared with a slight increase in equipment spending that was reported in the advance Q4 GDP report.

Article by Contingent Macro Advisors