Durable Goods: Surprise Decline to Start 2018

Bottom Line: Durable goods orders fell in January. This reflects sharp swings in aircraft orders, evidenced by just 28 orders at Boeing in January versus 256 in December. They have climbed at a 2.4% annualized rate in the last three months, slower than the pace of the last 12 months, a 6.8% annualized rate. Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are still seeing accelerating growth, though, and in January were modestly above their Q4 level, suggesting that capital spending still started Q1 having a positive impact on GDP growth. Durable Goods Orders FELL by 3.7% in January, compared with market expectations for a decline of 2.0%. Moreover, the prior month was revised lower from 2.9%to 2.6%. Transportation Orders FELL by 10.0% with civilian aircraft orders dropping by 28.4% while motor vehicle orders climbed by 0.1%. Ex-transportation orders FELL by 0.3%. Core Durable Goods Orders, those excluding both civilian aircraft and defense, FELL by 0.98% and are 6.1% ABOVE their year ago level. Nondefense Capital Goods Shipments ROSE. Including civilian aircraft, they ROSE by 0.0% and excluding them they ROSE by 0.1% Durable manufacturing inventories ROSE by 0.3%. The January level of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, is modestly above its Q4 level, suggesting that capital spending will still have a positive Q1 impact on GDP growth.