New Orders in Durable Goods, advance report, increased +3.0% for December 2011. November durable goods new orders jumped by 4.3% and October was a 0.1% increase. This means for all of Q4, we have an increase in durable goods new orders.
Manufacturing new orders surged 3.9% for December. November manufacturing new orders increased 6.2% but October declined -1.1%.
Core capital goods new orders increased 2.9%, after declining -1.2% in November and -0.9% in October. Core capital goods is an investment gauge for the bet the private sector is placing on America's future economic growth.
For all transportation equipment, new orders increased 5.5%, but this includes volatile nondefense aircraft, which increased 18.9% for December. Motor vehicles new orders increased 0.6% and defense aircraft new orders declined -6.8% for December.
Core capital goods are a leading indicator of future economic growth. It's all of the stuff used to make other stuff, kind of an future investment in the business meter. Core capital goods excludes defense and all aircraft.
Shipments in core capital goods increased 2.9%. November core capital goods shipments decreased -1.0% and October decreased -0.9%. Machinery is a large part of core capital goods and new orders in machinery for the last three months are +4.0%, +0.4% and -2.7% for December, November, October, respectively. This report is not adjusted for inflation.
It's typical for aircraft to vary dramatically, after all who orders up a billion dollar air-o-plane every day? This report is often dramatically revised as well.
To put the monthly percentage change in perspective, below is the graph of core capital goods, monthly percentage change going back to 2000. Looks like noise right? In January 2009, core capital goods new orders dropped -9.9% and also declined by -9.4% in December 2008.
Inventories, which also contributes to GDP, are at an all time high and up +0.3%, +0.6% and +0.4% for December, November, October respectively. Core Capital Goods inventories declined -0.1%, but increased +0.5% for November and +0.3% for October.
Unfilled orders increased +1.5% with core capital goods unfilled orders increasing by +0.9% for December.
Shipments contributes to the investment component of GDP. The graph below is core capital goods shipments, quarterly annualized percent change. As we can see, the effective rate is zero for Q4. Despite a solid durable goods report, and core capital goods shipments increasing 2.9% for December, the quarter overall, due to the previous two month's declines, isn't going to help Q4 GDP much.
Producer's Durable Equipment (PDE) is part of the GDP investment metric, the I in GDP or nonresidential fixed investment. It is not all, but part of the total investment categories for GDP, usually contributing about 50% to the total investment metric (except recently where inventories have been the dominant factor).
Producer's Durable Equipment (PDE) is about 75%, or 3/4th of the durable goods core capital goods shipments, in real dollars, used as an approximation.
What is a durable good? It's stuff manufactured that's supposed to last at least 3 years. Yeah, right, electronics, laptops and cell phones and crappy printers, refrigerators that break in a matter of months. Regardless, that's the definition.