• Durable goods orders better than expected in all categories.
  • December revisions improve across the board.
  • Business spending jumps to the best level since October.

New orders for long-lasting consumer and industrial goods slipped in January but outside of Defense Department procurement, which fell sharply, orders rose the most in more than two years.

The Commerce Department reported on Thursday that durable goods orders fell 0.2% last month, much less than the 1.5% decline that had been forecast.  Excluding orders for military goods, durable goods purchases rose 3.6%, the biggest surge since June 2017.  Military aircraft bookings plunged 19.6% in January.  

Durable Goods Orders


Orders excluding the volatile transportation sector, primarily automobiles and civilian aircraft, rose 0.9% easily besting the 0.2% median forecast. Orders for automobiles one of the largest categories of goods fell 0.8% but airliner orders soared 346.2% in January after falling 66.7% in December.  Boeing’s suspension of production for its troubled 737MAX aircraft has added considerable volatility to a historically variable classification.   

Spending in the non-defense capital goods ex-aircraft group, also called core goods orders, and a well-known proxy for business investment climbed 1.1%, more than ten times the 0.1% prediction, matching the strongest level of the last seven months.

Non-defense Capital Goods ex-Aircraft


Revisions to December’s figures for goods designed to last three year or more in ordinary use improved in all categories. Overall durable goods orders were adjusted to 2.9% from 2.5%, ex-defense orders rose to -1.9% from -2.5%, ex-transport purchases became 0.1% from -0.1% and non-defense capital goods rose to -0.5% from -0.9%.

Business spending had declined steadily in 2019 as the US trade war with China waxed and waned.

The initial announcement that a deal had been reached in October and the signing on January 15th in Washington have brought a notable improvement.  In the four months starting in October investment has averaged 0.45% monthly, the best period since April to July 2018.  For the prior six months, April to August last year spending dropped 0.05% monthly.

Orders rose for heavy machinery, primary metals and computers gained while falling for electrical equipment and household appliances.

In a separate release from the Bureau of Economic Analysis fourth quarter annualized GDP was confirmed at 2.1%. The third and final figure will be issued on March 26th. 

Annualized GDP


The largely positive picture for orders in January, most of which were placed before the Coronavirus hit factories in China and global supply chains could change considerably in the months head as companies cope with disruptions in production and potentially weakening demand. Sectors like travel, accommodation and leisure are particularly vulnerable and if the slowdown accelerates that might stretch to its suppliers from aircraft manufacturers to restaurant chandlers.

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