Durable Goods Orders Post Strong November on Business Investment

Here's another bit of evidence that the nation's factory sector is mending. Durable goods orders rose a seasonally adjusted 0.2% in November, the U.S. Commerce Department announced Thursday. However, the top-line 0.2% increase doesn't convey the entire story. Taking away the often-volatile aircraft orders component, which dropped sharply in November, leaves the "core rate" with an impressive 2% jump.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%%A Bloomberg News economists' survey had expected November durable goods orders to rise 0.5%. They fell 0.6% in October, after a 2.2% increase in September.

In November, orders were strong in nearly every major industrial category. Core capital equipment goods -- a key measure of business capital investment -- jumped 2.9%. Computer orders rose 3.7%, machinery increased 3.5%, electrical equipment/appliances were 3.2% higher, fabricated metal products went up 1%, primary metals increased 1.4%, and defense orders for capital goods surged 8.5%. The laggard: transportation equipment (including airplanes), which plunged 5.5%.

The Commerce Department also said inventories decreased 0.2%, and unfilled orders declined 0.7%.

Durable goods orders are new orders by stores and businesses for immediate and future delivery of factory hardgoods. These orders measure how busy factories are likely to be in the immediate months ahead for such items as refrigerators, washers and dryers, cars, computers and industrial machinery.

Rising durable goods orders usually indicate that businesses are experiencing sustainable growth -- demand -- which usually translates into higher revenue and increased production by the manufacturing sector. Those would be two bullish signs for the U.S. stock market.

Another impressive stat was that core capital equipment goods jumped 2.9%. This suggests businesses are becoming more confident about the U.S. economic recovery. They're investing with the goal of expanding operations, something that historically has meant they see better prospects for revenue and earnings growth in the year ahead.
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