Manufacturing is picking up steam as December durables were strong and above expectations and November was revised up notably. New factory orders for durables in December jumped another 3.0 percent, following a 4.3 percent surge the month before (prior revised estimate, up 3.7 percent). The December increase topped market expectations for a 2.2 percent gain. Excluding transportation, durables rose a healthy 2.1 percent after a 0.5 percent advance in November (prior revised estimate, up 0.3 percent). The December gain came in much higher than the consensus forecast for a 0.7 percent increase.
By components, strength was widespread in December. Transportation grew 5.5 percent, following a 16.6 percent surge in November. Subcomponent strength was in nondefense aircraft although motor vehicles also gained.
Outside of transportation, orders were positive in most major subcomponents. Increases were seen in primary metals, up 5.1 percent; machinery, up a robust 6.0 percent; computers, electronics & communications equipment, up 1.2 percent; and "other" durables, up 0.2 percent. Declining were fabricated metals, down 1.4 percent, and electrical equipment, down 1.1 percent.
We also saw a 2.9 percent rebound in nondefense capital goods excluding aircraft, following a 1.2 percent dip in November. Shipments for this series also improved, rising 2.9 percent in December, following a 1.0 percent decline the month before. The latest shipments number will have economists nudging up their forecasts for the business equipment component in fourth quarter GDP.
Today's report indicates the manufacturing is gaining strength and points to a recovery that actually may be gaining momentum despite Fed skepticism about the outlook. On the news, equity futures rose slightly. At the same time, jobless claims came in a little higher than expected but remained on a downtrend.
Market Consensus before announcement
Durable goods orders in November surged a revised 3.7 percent, following a 0.1 percent uptick the prior month. Excluding transportation, durables grew 0.3 percent after a 1.6 percent gain in October. Outside of transportation, new orders were led by primary metals and machinery with fabricated metals and "other" also gaining. Weakness was seen in computers & electronics and also electrical equipment. A disappointment was in civilian capital equipment excluding aircraft which dipped 1.2 percent after a 0.9 percent decline in October.