Durable Goods: Slow Start to '20, Negative Revisions To Dec.

February 27, 2020
Bottom Line: Durable goods orders fell slightly in January, better than expected, but December's strong rebound was revised lower. Boeing's woes continued to impact overall durable goods orders as orders excluding transportation rose more than expected. Core capital goods shipments, a key metric for tallying the business investment component of GDP, were sharply lower on the month but still higher than in the 4th Quarter, suggesting a net positive for GDP. Overall, the trend in durable goods orders was weak but showing hints of stabilization prior to the Covid-19 supply chain disruptions. So far, those disruptions have not had a major impact on domestic manufacturing, according to regional manufacturing surveys -- but sentiment can switch quickly when stock markets fall sharply. Durable Goods Orders FELL by 0.2% in January, compared with market expectations for a decline of 1.4%. Moreover, the prior month was revised higher from 2.4%to 2.9%. Transportation Orders FELL by 2.2%. Ex-transportation orders ROSE by 0.9%. Core Durable Goods Orders, those excluding both civilian aircraft and defense, ROSE by 0.70% and are 1.0% BELOW their year ago level. Nondefense Capital Goods Shipments FELL. Including civilian aircraft, they FELL by 1.7% and excluding them they ROSE by 1.1% Durable manufacturing inventories were UNCHANGED. 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 have a positive Q1 impact on GDP growth.