Implications: Orders for durable goods ended 2017 on a high note, rising 2.9% in December on the back of surging aircraft orders. But even excluding the volatile transportation sector, orders increased 0.6% in December, and rose 8.2% in 2017, the largest annual increase going back 2010. Add in that orders have been accelerating, with total durable goods orders up at an 18% annual rate over the past three months and ex-transportation orders up at a 9.9% rate over the same period, and 2018 looks to be in line for a strong start. The details of non-transportation orders in December show mixed results. Healthy increases for primary metals, fabricated metal products, and machinery more than offset modest declines in orders for electrical equipment, appliance & components, and computer & electronic products. With tax reform signed into law in late December – including a shift to full expensing for business investment instead of depreciation over several years – we expect orders (particularly machinery orders) to continue to pick up as companies increase investment. The best news in today's report was for shipments of non-defense capital goods ex-aircraft, or "core" shipments – the measure most important for calculating the business equipment portion of GDP growth. These shipments increased 0.6% in December and were up at a 12.5% annual rate in Q4 vs the Q3 average, the second consecutive quarter of double-digit growth. This reflects the willingness of businesses to invest more aggressively for efficiency purposes as the labor market gets tighter, and a positive outlook for companies headed into 2018. As a whole, durable goods orders continue to show signs of an economy that is picking up pace, with better policies out of Washington adding wind to its back.
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