New orders for durable goods dropped 7.8% in January, following a downwardly revised 2.8% gain in December (originally 3.1%). Consensus expectations called for about a 3% fall, which would have basically reversed the December increase.

The drop was spread across several of the categories included in this "advance" report. The largest was in aircraft, both nondefense and defense. These had been up sharply in both November and December, so the decline now would not have been surprising. Motor vehicles, similarly, had been up three months running, and the January decrease, 5.1%, offset almost exactly their December rise of 5.3%. Total orders less transportation equipment were off 3.1% after December's 2.3% increase. Looking at the accompanying graph, we can't help but notice the developing downtrend in this series; at $147.7 billion in January, these orders are 4.2% below their peak last June. This comparison is less meaningful for total orders, since they swing so widely from month to month.

Nondefense capital goods excluding aircraft also fell, by 6.0%. This included machinery, computers and communications equipment. Correspondingly, orders for primary metals were down, although those for fabricated metal products rose. The other sector with an increase was electrical equipment, appliances and components. Also, despite the fall in orders for defense aircraft and parts, those for total defense capital goods were up 10.7%.

Durable goods shipments continued their recent pattern of modest monthly increases, rising 0.2%, after 0.5% in December and 0.3% in November. Excluding transportation, shipments were up 0.9%, after declines of 0.4% and 0.3%, respectively in the two preceding months.

Inventories rose 0.3% but were unchanged less transportation equipment. The inventory/shipments ratio was up ever so slightly from 1.407 to 1.408, while excluding transportation, it went down from 1.490 to 1.477. These latest values compare [unfavorably] with annual averages in 2006 of 1.356 for total durables and 1.417 excluding transportation.