Durable Goods Up a Strong 3% in December

Transportation equipment had the largest increase, $3 billion or 5.5% to $58.4 billion due to nondefense aircraft and parts.

New orders for manufactured durable goods in December increased $6.2 billion or 3% to $214.5 billion, the U.S. Census Bureau announced on Jan. 26.

This increase, up five of the last six months, followed a 4.3% November increase. Excluding transportation, new orders increased 2.1%.

Excluding defense, new orders increased 3.5%.

Transportation equipment, up two consecutive months, had the largest increase, $3.0 billion or 5.5% to $58.4 billion. This was due to nondefense aircraft and parts, which increased $3.1 billion

"Like other recent data, the December report on demand for long-lasting goods paints a picture of an economy that ended a volatile and challenging 2011 on a positive note," said Cliff Waldman, economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). "Total new orders, now up during five of the last six months, increased a strong 3% after an even stronger 4.3% advance in November and for the year registered a solid 10% gain over 2010 levels.

Excluding the often volatile transportation component, orders were up a more modest 2.1% in December but were nonetheless a nice acceleration from a weak 0.5% increase during the previous month. Even more encouraging were the data on new orders for nondefense capital goods excluding aircraft. A widely accepted proxy for business equipment investment, this indicator had been flashing clear signs of slowing in recent months but increased a significant 2.9% in December and, like total new orders, was up by 10% for the year as a whole.

"The sharp positive turn in equipment spending during December might very well have been motivated by concerns about the expiration of equipment expensing provisions," he added. "But the tenor of the December report was positive overall for U.S. manufacturing strength, with strong gains in such sectors as machinery and primary metals. However, given the spate of data-distorting events that occurred during 2011, from the Japanese earthquake to unnerving fights over the U.S. debt ceiling, the December numbers are not necessarily indicative of a sea change in the U.S. outlook, especially in light of clear evidence of widespread slowing in global growth. The most likely forecast for U.S. manufacturing is for positive but moderating output growth."

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