Today's durables report came in mixed but core orders may be back on an uptrend. Durables orders in November declined 1.3 percent, following a revised 3.1 percent drop the prior month. However, the latest was a little more negative than analysts' expectation for a 1.0 percent fall. Weakness was led by a drop in civilian aircraft orders. However, excluding transportation, new orders for durables rebounded 2.4 percent after a 1.9 percent contraction in October. Strength in core orders was broad based.
By major industries, transportation plunged a monthly 11.9 percent in November after falling 6.3percent the month before. The decline was mainly in nondefense aircraft which plummeted a monthly 53.1 percent-essentially Boeing orders. Also, within transportation, motor vehicles slipped 2.9 percent while defense aircraft & parts rebounded 7.9 percent.
Outside of transportation, strength was widespread, led by a 5.8 percent jump in computers & electronics, with electrical equipment up 5.6 percent and with primary metals up 3.0 percent. Also up were fabricated metals, machinery, and "other."
Business investment in equipment is showing signs of strength. Nondefense capital goods orders excluding aircraft in November rebounded 2.6 percent after falling 3.6 percent the prior month. Shipments for this series gained 1.0 percent, following a 1.2 percent contraction in October.
Outside of nondefense aircraft, today's report is notably positive. It looks like manufacturing is regaining some strength in the fourth quarter.
Market Consensus before announcement
Durable goods orders in October fell a revised 3.3 percent (originally down 3.4 percent), following a 5.0 percent spike the month before. Weakness was broad based but led by transportation. Excluding transportation, durables declined 2.7 percent after rising 1.3 percent in September. Transportation fell 5.2 percent in October after surging 16.5 percent the month before. The drop was mainly in defense aircraft but nondefense aircraft and also motor vehicles orders eased. Other industries generally declined but mostly after a moderate gain in September. More recently, the ISM durables orders index for November remained positive but slowed from 58.9 in October to 56.6. For regional surveys, the Philly Fed durables orders index swung sharply into positive territory while Empire State's comparable index dropped into negative territory from positive.