New orders for durable goods fell 2.5% (month-over-month) in December,
marking the third consecutive monthly decline after slipping 0.1%
(previously -0.3%) in November and 3.1% in October. The headline drop
was well below market expectations for a 1.5% increase; however,
excluding the transportation sector, orders rose 0.5% in December,
thereby building further on the upwardly revised 4.5% (previously
3.6%) increase in November. The increase in ex-transportation orders
in December was only modestly below expectations for a 0.9% gain.
Overall, durable goods orders continued to be weighed down by the
transportation sector, which declined 12.8% in December following
13.1% and 6.2% drops in November and October, respectively. The
decline in transportation orders in December was despite a modest 1.7%
pick-up in motor vehicle and parts orders as civilian aircraft orders
plunged 99.5% in the month despite an earlier reported increase in
orders for aircraft from Boeing. Excluding the transportation sector,
orders rose 0.5% in December, and the gain in November was revised up
to 4.5% (previously 3.6%). A solid 10.6% gain in machinery equipment
offset declines in primary metals (-4.7%), and computers and
electronic products (-1.2%). Orders of non-defence capital goods
excluding aircraft, a commonly used proxy for equipment and software
investment, rose an encouraging 1.4% in December following a 3.1%
increase in November.
Shipments of durable goods rose 1.4% in December following a 0.5%
increase in November. Shipments of non-defence capital goods excluding
aircraft, an indicator of current investment in equipment and
software, rose 1.7%, thereby building further on an upwardly revised
1.4% increase in November (previously 1.1%). Inventories rose 0.7% in
December while unfilled orders slipped 0.4% in the month.
With the modest increase in December, shipments of non-defence capital
equipment excluding aircraft rose an annualized 6.4% in the fourth
quarter of 2010. This result suggests that investment in equipment and
software continued to grow in the fourth quarter, although the pace
appears to have moderated to about 7% from the 15.4% and 24.8% gains
recorded in the third and second quarters, respectively. Despite this
moderation, tomorrow's GDP report will likely show that stronger
consumer spending and a sharp improvement in the trade balance allowed
overall GDP growth to improve to a 3.5% rate in the fourth quarter
from the 2.6% increase in the third quarter. We expect that rising
demand, along with stimulative fiscal and monetary policy will provide
support to business investment going forward, which is consistent with
our expectation that overall GDP growth will rise 3.4% on an annual
basis in 2011 from 2.9% in 2010.
In another report, initial unemployment insurance claims jumped a
disappointing 51,000 to 454,000 the week ending January 22, which more
than reversed the previous week's 44,000 drop to a revised 403,000
level (initially reported as 404,000) the previous week. The rise in
claims in the latest week was significantly larger than the 405,000
level expected by markets ahead of the report. The four-week moving
average of initial claims, which normally provides a better indication
of the underlying trend in labour markets, jumped to 428,750 from
413,000 for the prior week. Continuing claims (for the week ending
January 15) rose 94,000 to 3,991,000 from 3,897,000 last week. The
rise in claims in the latest week is disappointing, although bad
weather, as well as difficulties in seasonally adjusting the data
around the Martin Luther King holiday, likely played a role.
Source: ActionForex.Com
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