US DATA
December's advance durable goods report was solid overall, despite a large miss in the headline orders figure (-2.2% M/M vs +0.6% expected, prior rev -2.0% from -1.2%).
- That's because the miss was driven by a further drop in new orders in the extremely volatile nondefense aircraft and parts category (-45.7% M/M, after -20.1% in November), for the lowest level of orders in the category since December 2020 when excluding the one-off net negative figure in June 2024 due to Boeing order cancellations. Industry reports suggest that Boeing net orders were weak in December as well.
- Indeed the core figures were stronger than expected: ex-transportation durables orders were in line at +0.3% (-0.2% prior), but the capital goods orders growth of 0.5% (0.3% expected) especially impressed on a big upward revision to prior (0.9% vs 0.4% initially reported). Core shipments rose 0.6% (0.2% expected), up from 0.4% prior (upwardly rev from 0.3%).
- Ignoring aircraft orders for a moment, the report suggests rising momentum in capital equipment spending. It's been the most solid 2-month period for core capital goods orders since late 2022/early 2023, with the 3M/3M SAAR pickup to 3.8% a 27-month high and the 5th consecutive monthly acceleration.
- Core shipments were the strongest in 11 months, with the Y/Y (+0.7%) a 10-month high and momentum picking up to 3.0% (3M/3M SAAR, a 22-month best).
- The "soft" data (including improving ISM and S&P Manufacturing PMIs, and regional Fed manufacturing surveys) have been pointing to a stabilizing manufacturing sector for a few months now (albeit from soft levels), and the durable goods orders data appear to be "hard" data pointing in a similar direction.
- That bodes well for business capex going into 2025, and suggests that the broader economy may be regaining some momentum.
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