New Orders for Durable Goods Rose 2.9% in December

 

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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Posted on Friday, January 26, 2018 @ 12:33 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.