November 2017 Durable Goods Orders
Submitted by Atlas Indicators Investment Advisors on January 3rd, 2018Durable Goods Orders soared in November according to data from the Census Bureau. Aircraft orders (up 31 percent in the period) provided much of the lift in the period’s 1.3 percent improvement. This most recent uptick followed an upwardly revised, albeit still disappointing, October tally of -0.4 percent (originally -1.2 percent). Versus a year earlier, orders for wares expected to last longer than three years improved by an impressive 5.4 percent.
Details within the report are not quite as uplifting as the headline figures, but no worrisome trends have developed either. Primary metal orders rose, but fabricated metal orders declined. Both machinery and computer orders dropped, but electrical equipment requisitions were higher. Transportation equipment was strong also. In all, it was a mixed bag with a slight downward bias.
Atlas’ favorite line in the report was negatively skewed as well but not to the point of concern. Orders for “nondefense capital goods excluding aircraft” (aka core durable goods orders) turned negative to -0.1 percent after gains of 2.3 and 0.8 percent in September and October respectively. Despite the monthly downtick, this proxy for business confidence has grown 5.1 percent in the past 12 months.
While November was not a very strong period for new orders, this indicator has a positive sloping trend. This longer-term upward bias is a positive for the overall economy. In particular, capital investments are moving ahead, suggesting businesses are becoming more confident in the stability of the economic expansion. As 2018 begins to unfold, Atlas will continue watching the core durable goods measure as a proxy for how companies are reacting to the recently signed tax plan. Some pundits insist it will support investment in capital equipment; this indicator should help us understand if such behavior materializes.