Highlights
Manufacturing is showing signs of strengthening with the latest report on durables orders. Durable goods orders increased 3.1 percent in December, following a 2.2 percent rebound in November. December's figure was in line with the consensus forecast for a 3.0 percent increase in new durables orders. The rebound was led by the transportation component but was still healthy in other components. Excluding the volatile transportation component, new orders advanced 2.3 percent, following a 1.0 percent dip in November. Excluding defense, new orders posted a robust 3.9 percent boost in December after a 0.7 percent gain the prior month. Within transportation, new orders for motor vehicles jumped 6.8 percent in December, following a 2.3 percent increase n November. Civilian aircraft capital goods orders soared 48.0 percent, following a 3.8 percent rise in November. Orders for defense aircraft fell 17.5 percent, following a 38.5 percent surge in November. Excluding defense, new orders posted a robust 3.9 percent boost in December after a 0.7 percent gain the prior month.

Strength in orders in December was broad-based. Industry categories posting gains in December were primary metals, up 4.5 percent; fabricated metals, up 2.5 percent; machinery, up 5.0 percent; computers & electronics, up 1.0 percent; transportation equipment, up 4.8 percent; and "other," up 1.2 percent. Of major categories, only electrical equipment declined, down 1.4 percent.

Private sector business equipment investment is picking up. Nondefense capital goods orders rebounded a sharp 9.0 percent in December, following a 0.3 percent decline the month before. Excluding aircraft, nondefense capital goods orders rose 2.4 percent, following a 1.0 percent decline in November.

Overall inventories rose 0.4 percent in December, following a 0.3 percent rise in November. Overall shipments posted a healthy 0.8 percent boost in December while unfilled orders increased 2.3 percent. Unfilled orders for durables have been up in 19 of the last 20 months. Turning to a key input into the business equipment component of GDP, shipments of non-defense capital goods fell 0.4 percent in December after 1.7 percent boost in November and a 1.6 percent drop in October. Despite strength in orders, the weak and lagging shipments figures suggest softness for the business equipment component in fourth quarter GDP.

Year-on-year, new orders for durable goods rose to up 2.6 percent from up 0.4 percent in November. Unfilled durables orders firmed to up 20.6 percent year-on-year in December from up 20.5 percent in November.

Overall, today's report shows a rebound in manufacturing. Shipments have been strong and will likely show up in exports and in consumer spending as shipments of nondefense capital goods have been lagging new orders since much of that is for aircraft. Even the auto sector is showing improvement. Today's numbers are going to put upward pressure on interest rates and support the dollar. Equities have been fickle on whether good news is good news or bad news and the reaction could go either way.

2007 Release Schedule

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