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Economy in Brief

U.S. Durable Goods Orders Plunge Due To Aircraft
by Tom Moeller February 24, 2006

Durable goods orders plunged 10.2% last month following an upwardly revised 2.5% increase during December. The drop far outpaced Consensus expectations for a 2.0% decline, however, the details of the report again portrayed a constructive picture of activity in the factory sector.

Aircraft & parts orders, which had more than doubled during the prior three months, fell 60.3% m/m yet remained up 59.4% from January of 2005.

New orders for motor vehicles & parts also fell, by 3.3% (+0.9% y/y) and have been moving erratically sideways since late 2003.

Less the transportation sector altogether, durable goods orders rose 0.6% following an upwardly revised 1.9% increase during December and during the last six months have risen at an accelerated 16.4% annual rate.

Higher electrical equipment orders led the strength in January with a 2.7% (7.5% y/y) gain. Orders for fabricated metals (5.8% y/y) & primary metals (10.0% y/y) also rose but machinery orders reversed 2.5% (14.7% y/y) of an upwardly revised 9.5% December surge. Orders for computers & electronic products also slipped 0.4% (+2.2% y/y) due to an 11.0% (+4.0% y/y) plunge in computer orders.

Orders for nondefense capital goods collapsed 20.0% due to the drop in aircraft but less aircraft, nondefense capital goods orders slipped just 0.4% after an upwardly revised 5.0% December surge.

Shipments of durable goods fell 1.3% (+6.5% y/y) after an upwardly revised 4.1% gain during December. Less the transportation sector shipments added 0.4% (6.8% y/y) to the upwardly revised 3.1% December increase.

Order backlogs slipped 0.8% (+16.0% y/y) but less transportation backlogs gained another 0.3% (10.4% y/y). The ratio of backlogs to shipments outside of transportation slipped and was squarely in the middle of the range of the last two years.

Durable inventories rose 0.3% (3.0% y/y).

NAICS Classification Jan Dec Y/Y 2005 2004 2003
Durable Goods Orders -10.2% 2.5% 5.4% 8.6% 9.5% 4.1%
    Excluding Transportation 0.6% 1.9% 8.3% 8.6% 11.7% 3.1%
Nondefense Capital Goods -20.0% 2.0% 10.2% 20.0% 11.0% 4.2%
 Excluding Aircraft -0.4% 5.0% 6.5% 10.7% 9.5% 4.8%
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