Durable Goods Orders Rise 2%

The report, which was stronger than expected, gives more signs that conditions in the factory sector have stabilized

December durable goods orders rose 2.0%, higher than expected, and shipments increased 0.5%. (The November durable goods orders was revised lower to a decline of 6.0% from a decline of 4.8% previously). Rounding out the report was a 0.4% decline in durable inventories, which marked the eleventh consecutive decline and left the I/S ratio at 1.58 from 1.59.

As for orders, transportation rose 3.5% thanks to a 6.8% increase in aircraft and parts following huge swings seen over the prior few months. The high-tech aggregate rose 3.5%, which marks the third straight month this aggregate has risen. Strength was carried by a 13% gain in semiconductors. Most other components revealed more subdued figures.

Overall, the tone of the report is consistent with the view that conditions in the factory sector have stabilized, which is in agreement with other recent factory data including the NAPM, industrial production, and the Philly Fed survey. The gains in non-defense capital goods data bode well for an improvement in real equipment spending growth in the fourth quarter relative to the large declines seen over the last two quarters, while the continued drop in inventories raises the prospects for a "ramp-up" in production in the first quarter to restock depleted shelves.

from Standard & Poor's Global Markets

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