Economy in Brief

Manufacturers' new orders for durable goods fell 0.9% m/m (+15.6% y/y) in December after an upwardly revised 3.2% m/m increase (initially 2.5%) in November. The Action Economics Forecast Survey was expecting a 0.5% m/m decline. For all of 2021, orders were up 20.9% after having fallen 13.6% in 2020.

The December decline was due mostly to a 3.9% m/m fall (+23.6% y/y) in transportation orders following an 8.2% m/m jump in November. A 13.5% m/m drop in aircraft orders was the major source of the decline in transportation orders in December. Aircraft orders had jumped up 30.6% m/m in November. Orders for motor vehicles and parts were up 1.4% m/m, their third consecutive monthly increase. Excluding transportation, the remainder of orders rose 0.4% m/m (+12.0% y/y) in December on top of a 1.1% increase in November. Across the other major sectors, orders for primary metals and fabricated metal products rose in December while orders for machinery, computers and electronic products and for electrical equipment fell.

Durable goods shipments rose 0.8% m/m (10.1% y/y) in December, their fourth consecutive monthly increase, after an upwardly revised 0.8% m/m rise in November (initially reported as 0.7% m/m). Transportation shipments were up 0.9% m/m in December while shipments of defense goods slumped 2.5% m/m. Shipments excluding transportation rose 0.8% m/m while shipments excluding defense were up 1.0% m/m in December. This report now contains an advance reading on shipments of nondurable goods. They slipped 0.1% m/m (+13.8% y/y) in December, their first monthly decline in 10 months, following a 0.5% m/m rise in November. Shipments in all manufacturing industries increased 0.3% m/m (+11.2% y/y) in December after an upwardly revised 0.7% m/m gain in November (initially 0.6% m/m).

Also in the report are key readings on capital goods shipments and orders. The shipments figures provide a dependable reading on the course of business spending on equipment in the national accounts. Core (that is, excluding defense and aircraft) capital goods shipments increased a solid 1.3% m/m (10.4% y/y) in December following an upwardly revised 0.4% monthly gain in November (initially 0.3% m/m). This provides a good starting point for business equipment spending for Q1 2022. Core capital goods orders were unchanged in December (+10.4% y/y) following a 0.3% monthly gain in December (revised up from 0.1% m/m).

Unfilled orders for durable goods rose 0.5% m/m (+7.4% y/y) in December after a 0.8% m/m gain in November. Unfilled orders are not calculated for nondurable goods. Manufacturing inventories increased 0.2% m/m (8.9% y/y) in December, reflecting a 0.7% m/m rise in durable goods inventories and a 0.5% m/m decline in nondurable goods inventories.

The durable goods and nondurable goods data are available in Haver's USECON database. The Action Economics consensus forecast figure is in the AS1REPNA database.

At today's meeting of the Federal Open Market Committee (FOMC), the Fed indicated it will continue to reduce the stimulus it has been providing to the economy.

The Fed announced that it will lessen its planned purchases of Treasury securities to $20 billion per month from $40 billion as indicated at the last meeting, and to pare purchases of agency securities to $10 billion per month from $20 billion.

The meeting statement indicated that the federal funds rate target will remain in a range of 0.0% to 0.25%, where it has been since March 2020, "but the Committee expects it will soon be appropriate to raise the target range for the federal funds rate."

Specifically addressing inflation, the Fed indicated, "Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation."

The Fed went on to state, "Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation."

The statement issued following today's meeting can be found here.