The December Durable Goods Orders report came in better than
expected, highlighting that corporate capital expenditures will
remain a growth driver for the economy despite the expiration of
accelerated depreciation expense.
Headline Durable Goods Orders increased 3% in December, above
the 2% consensus expectation, while the November headline gain of
3.9% was revised upwards to 4.3%. The 'core' Durable Goods Orders
reading, which strips out defense and aircraft orders given their
inherent 'lumpiness' on a month-to-month basis, also came in better
than expected at a gain of 2.1%. This compares to the weak 'core'
reading in November of a 1.2% drop.
This report tracks orders placed with domestic manufacturers of
hard goods for immediate or future delivery, which gives us a good
sense for how busy factories will be to fill these orders. Not only
does the report give us insight into the demand for consumer
durable goods like refrigerators and cars, but also equipment for
business such as machinery and computers. Growing capital
expenditures by businesses show their confidence in their business
prospects as well as the outlook for the broader economy.
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The annualized growth pace of capital spending in tomorrow's fourth
quarter GDP report will show a deceleration from the third
quarter's torrid pace. This is primarily a function of the
expiration of accelerated depreciation expense. The expectation is
that this key growth driver will get back to its solid recent trend
line in the following quarters. This morning's blow-out Caterpillar
) report confirms that demand for the country's industrial
operators remains strong.