Implications: A pleasant upside surprise in the headline for new durable goods orders in February after declines in December and January. But don't get too excited that durables goods avoided a weather impact. The strength in orders was mostly due to the volatile transportation sector (aircraft and autos); orders excluding transportation increased only 0.2% in February. The best news in today's report was that shipments of "core" capital goods, which exclude defense and aircraft, increased 0.5% in February. Look for further healthy gains in the next few months as companies make up for activity lost to adverse weather in prior months. The pervasive impact of the weather is clearly shown in the table below. The column with the 3-month percentage changes for orders and shipments is mostly negative and any positives are very small. We expect that to reverse over the next three months. Cutting through the fog of the weather-related issues, we still think both orders and shipments will accelerate in 2014. Consumer purchasing power is growing and debt ratios are low, leaving room for an upswing in appliances. Meanwhile, businesses have record profits and balance sheet cash at the same time that capacity utilization is reaching long-term norms, leaving more room (and need) for business investment. Signaling future gains, unfilled orders for "core" capital goods rose 0.2% in February, hitting a new record high, and are up 9.3% from a year ago.
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