US Durable Goods Orders: Equipment investment makes full recovery - Capital Economics
|Michael Pearce, Senior US Economist at Capital Economics, offered a quick analysis on Wednesday's release of the US Durable Goods Orders data. The headline sales rose 0.2%, while core sale (excluding transportation items) increased by 0.7% in December.
Key Quotes:
“The weaker 0.2% gain in headline durable goods orders in December was mainly due to ongoing problems among aircraft manufacturers and a drop off in defence orders. The bigger story is the continued strong gains in core orders, which underlines that the recovery in business equipment investment – which looks set to rise above its pre-pandemic level in the fourth quarter – still has plenty of momentum.
The 1.0% m/m fall in transport orders, primarily reflecting the continued weakness in commercial aircraft orders at Boeing, dragged down headline durable goods orders in December. Stripping out transportation, core orders rose by a solid 0.7%, with non-defence capital goods orders ex-aircraft increasing by 0.6% m/m.
Despite the continued drag from weak aircraft demand, durable goods orders and shipments are now back above pre-pandemic levels, with the continued strength of new orders surveys suggest demand will continue to strengthen from here. That continued solid performance is one reason why we expect economic growth to surprise on the upside over the next few years, and for the economy to emerge from the pandemic with relatively little long-term scarring.”
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