Manufacturing momentum is oscillating according to the latest durables report. New factory orders for durables in January fell back 4.0 percent, following a revised 3.2 percent jump in December (prior revised estimate, up 3.0 percent) and 4.2 percent surge in November. The decline in January was much worse than the consensus forecast for a 0.7 percent dip. Excluding transportation, durables fell 3.2 percent after a revised 2.1 percent advance in December (prior revised estimate, up 2.2 percent) and 0.3 percent rise in November. The January decrease posted significantly below market expectations for a 0.3 percent increase.
By components, weakness was led by transportation but other components were mostly down. Transportation dropped 6.1 percent in January, following a 6.4 percent boost the prior month. Subcomponent weakness was in nondefense and defense aircraft (very volatile series) as motor vehicles rose somewhat.
Outside of transportation, orders were down in most major subcomponents. Declines were seen in primary metals, down 6.7 percent; machinery, down 10.4 percent; and electrical equipment, down 1.9 percent. On the upside were fabricated metals, up 0.7 percent; computers & electronics, up 0.8 percent; and "other," up 1.1 percent.
Business investment in equipment stalled in January as nondefense capital goods excluding aircraft dropped 4.5 percent, following a 3.4 percent jump in December. Shipments for this series declined 3.1 percent after rising 2.8 percent the prior month. This is not a good start for the equipment component of business fixed investment in first quarter GDP.
The durables orders indicator is living up to its reputation as the likeliest most volatile monthly series for the U.S. among major indicators. It appears to be two steps forward and then one step backward. While disappointing, today's report should be interpreted cautiously as the overall picture for manufacturing still looks good.
On the news, equity futures slipped but remained positive. Somewhat later, futures turned mixed.
Market Consensus before announcement
Durable goods orders in December jumped another 3.0 percent, following a revised 4.2 percent surge the month before. Excluding transportation, durables rose a healthy 2.2 percent (prior revised estimate 2.1 percent) after a 0.3 percent advance in November. By components, strength was widespread in December.