Implications: Durable goods orders surprised to the upside in January on the back of rising aircraft orders, while orders outside the transportation sector left something to be desired. Stripping out the typically volatile transportation sector – which rose 1.2% in January – shows durable goods orders declined 0.1%. With the transportation sector likely to be more volatile than usual in coming months (as Boeing deals with fallout from the 737 Max 8), the ex-transportation reading will take on even greater importance as a monitor of short-term activity. A closer look at the details of the January report shows that rising orders for computers and communication equipment couldn't offset declines in the broader "computers and electronic products" category, while a healthy pickup in machinery orders was largely offset by declining orders for both primary and fabricated metal products. More important than month-to-month changes in either direction, the trend continues to show a healthy pace of activity, with total orders up 8.4% in the past year, while orders excluding transportation are up 4.5%. Among the most important data released in the durable goods report are shipments of non-defense capital goods ex-aircraft (a key input for business investment in the calculation of GDP growth), which rose 0.8% in January and, if unchanged in February and March, will be up at a 3.0% annualized rate in Q1 vs the Q4 average. This healthy growth in "core" shipments continues the trend seen in 2018, which posted the fastest full-year growth rate in "core" shipments in six years. Clearly, the promised benefits to business investment from the Tax Cuts and Jobs Act have, in fact, materialized. Healthy growth in durable goods orders and a strong labor market suggests that the economy will continue to grow near the fastest pace in a decade. Why some continue to warn of recession is a mystery. As far as the data show, companies (and consumers) don't seem nearly as worried as the pouting pundits, and political posturing has little chance of denting the strong growth track that entrepreneurs and innovators have set us on. In other news this morning, construction spending rose 1.3% in January (-0.1% including revisions to prior months). The increase in spending in January was led by highways and streets, educational facilities, and transportation projects. Construction spending ended 2018 on a weak note but looks to be accelerating early in 2019.
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