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Highlights
Although the headline durables number did not rise as much as expected, a sharp upward revision to January put the level for February about as expected. Overall new orders for durable goods in February gained 0.5 percent, following a revised 3.9 percent surge in January. February fell short of analysts' projections for a 1.0 percent increase but January's number was much higher than the prior estimate of 2.6 percent. Excluding the transportation, new durables orders rebounded 0.9 percent, following a 0.6 percent decline in January. The combination of the upward revision to January's headline number to a modest shortfall in the February percentage left traders content that today's report was essentially in line with expectations.
The latest advance in new durables orders reflected components mixed in direction after such a huge gain in January. New orders were led by machinery, up 4.7 percent, with fabricated metals and primary metals also rising-by 1.9 percent and 1.5 percent, respectively. On the downside were electrical equipment, down 3.3 percent; transportation, down 0.7 percent; and computers & electronic equipment, down 0.6 percent.
Nondefense capital goods orders excluding aircraft made a partial rebound, rising 1.1 percent after dropping 3.9 percent in January. Shipments for this category-a key ingredient in equipment investment in GDP-rose 0.8 percent in February, following a 1.9 percent dip the month before. Both shipments and orders have been volatile but remain on healthy uptrends. For both, January was notably strong.
Year-on-year, overall new orders for durable goods were healthy and little changed at up 10.9 percent in February, compared to up 11.1 percent the prior month. Excluding transportation, new durables orders slipped to 7.9 percent from 8.5 percent in January.
On the news, trading remained more focused on concern about Greek debt woes as equity futures were little changed but Treasury yields edged up. But the bottom line is that manufacturing is still the greatest source of strength for the recovery and today's durables report supported that view.
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Market Consensus before announcement
Durable goods orders in January posted a healthy revised 2.6 percent gain, following a 1.8 percent rebound in December. But excluding transportation, new durables orders fell 1.0 percent after a 1.9 percent gain in December. The decline in the core was led by a sharp drop in new orders for machinery. Otherwise, gains in the core were widespread. Recent regional manufacturing surveys and ISM point toward another healthy rise for durables orders in February.
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