Source: Economics Group of Wells Fargo Bank, N.A.
Summary
The pullback in equipment spending in the fourth quarter was worse than expected in revised data out this morning. In what may be a bid to get ahead of tariffs, new durable goods orders exceeded expectations with outperformance particularly evident in core capital goods orders.
Is This the Real Life, Is This Just Fantasy?
New orders for durable goods jumped 3.1% in January, which came with upwardly revised data that show a less-bad drop at the end of last year (-1.8% versus -2.2% previously reported). Much of this month-to-month volatility can be traced to aircraft orders specifically reflecting a turbulent net orders trend at Boeing as strike-related challenges work their way through activity.
The aircraft noise is not the only factor. When is comes to business investment, it is difficult to get a clean read on what is happening in the U.S. economy at present. In GDP revisions separately released this morning we learned that equipment spending cratered in the fourth quarter, falling at a 9% annualized rate (down from the previously reported 7.8% drop). How do we square that with this apparent resurgence in durable goods orders?