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Economy in Brief

U.S. Durable Goods Orders Rebounded, But ...
by Tom Moeller December 22, 2006

New orders for durable goods rose 1.9% last month, a gain after the offsetting volatility of the prior two months when orders fell 8.2% in October after an 8.7% September spike. Consensus expectations had been for a 1.5% rise n total orders during November.

During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods..

A 14.4% rise in total aircraft & parts orders last month, however, still added volatility. In addition, orders for motor vehicles & parts rose 0.2% (-3.9% y/y). Less transportation altogether, slipped 1.1%.

And broad based order declines in other industries continued to raise questions about the health of the factory sector. Orders for nondefense capital goods less aircraft fell 1.4% reflecting a 1.5% (+5.2% y/y) slide in electrical equipment orders and an 8.9% (+3.8% y/y) drop in machinery. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment & software from the GDP accounts.

Primary metals orders fell 1.9% (+4.1% y/y), down for the third month in the last four. To the upside were orders for computer s & electronic products which rose 7.5% (10.4% y/y).

Shipments of durable goods increased another slight 0.1% (2.7% y/y) after the downwardly revised 0.3% October uptick. Less the transportation sector shipments fell 0.1% (+4.6% y/y) for the second decline in the last three months. During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.

Durable inventories rose just 0.3% (7.8% y/y), the weakest monthly increase since a decline in February. Less the transportation sector inventories also increased a modest 0.2% (8.4% y/y) and the inventory to shipments ratio outside of transportation rose to the highest level since July of last year.

NAICS Classification November October Y/Y 2005 2004 2003
Durable Goods Orders 1.9% -8.2% -0.0% 9.0% 6.4% -0.6%
    Excluding Transportation -1.1% -1.6% 3.4% 9.4% 7.6% -1.7%
Nondefense Capital Goods -0.2% -14.8% -8.4% 21.4% 5.6% -3.4%
 Excluding Aircraft -1.4% -3.9% 6.2% 12.3% 2.8% -2.0%
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