Today's durables report is showing the manufacturing sector continuing to slowly gain momentum. Despite a December gain, the immediate question for the markets is whether a disappointment on headline expectations is offset by upward revisions to November and favorable detail for December. New orders for durable goods in December rebounded 0.3 percent after a revised 0.4 percent drop in November. The November number had previously been estimated to be a 0.7 percent decline. However, the December gain fell short of the market forecast for a 1.6 percent spike. But weakness was the lack of a rebound in Boeing orders. Excluding the transportation component, new durables orders advanced another 0.9 percent, following a 2.1 percent rebound in November.
Excluding the weakness in civilian aircraft, December was positive overall. Also, there is an indication of growing optimism by businesses. Nondefense capital goods orders excluding aircraft increased 1.3 percent in December after jumping 3.1 percent in November.
Year-on-year, overall new orders for durable goods improved to minus 3.1 percent in December from minus 6.9 percent the month before. Excluding transportation, new durables orders returned to positive territory, rising to plus 0.5 percent from down 5.5 percent in November.
Despite a shortfall in headline expectations for December, upward revisions to November, a jump in ex-transportation in December and another gain in nondefense capital goods ex aircraft may turn the report into a net positive-even compared to overall expectations. However, initial jobless claims were worse than expected.
Market Consensus before announcement
Durable goods orders fell a revised 0.7 percent in November, compared to the original estimate of a 0.2 percent increase. The Census Bureau released corrected historical numbers on January 15 after finding a programming error in earlier released historical revisions. Weakness was largely in civilian aircraft orders. Excluding transportation, durables jumped a revised 1.5 percent in November. Looking ahead, more recent manufacturing surveys have been mostly positive. The ISM new orders index for December improved by over 5 points to 65.5.