Durable Goods Orders Jump 3% as Transport Soars

Durable goods orders jumped a seasonally-adjusted 3.0% in January, boosted by surging aircraft orders, the U.S. Commerce Department announced Thursday. It was the biggest increase in durable goods orders since July.
However, the core rate, which excludes the volatile transportation component, fell 0.6%. December's durable goods orders were revised up to 1.9% from the previously-released 1% gain.

Economists surveyed by Bloomberg News had expected January durable goods orders to rise 1.5%. They fell 0.4% in November. Ex-transportation, durable goods orders rose 2.0% in December.

In the past 12 months, durable goods orders have risen 9.9%. In 2009, durable goods orders plunged a record 20%, as businesses first reacted to the recession, then severely pared back inventories as the financial crisis took hold, on fears of being left with product they could not sell amid soft demand.

Transportation Orders Soar

In January, transportation orders soared 15.6%, capital goods increase 6.6%, computers and electronics products orders jumped 4.6%, manufacturing orders rose 3.8%, communications orders rose 3.1%, primary metals rose 1.9%, fabricated metals orders were unchanged, and electrical equipment rose 1.4%; meanwhile, machinery orders plummeted 9.7%.

Durable goods orders are new orders by stores and businesses for immediate and future delivery of factory hard goods. 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.

Investors follow the statistic because rising durable goods orders usually indicate that businesses are experiencing sustainable growth, which usually translates into higher revenue and increased production by the manufacturing sector -- two bullish signs for the U.S. stock market.

In January, transportation, led by a jump in aircraft orders, skewed the top-line statistic higher, but overall the durable goods story continues to show a U.S. economic expansion, as December's durable goods order stat was revised higher, to 1.9%. True, core durable orders unexpectedly declined in January, but provided that decline does not continue in the months ahead, the factory expansion narrative will likely remain intact.