Another Head-fake from Durables Headline, Core Orders Rebound

Source: Economics Group of Wells Fargo Bank, N.A.Summary The drop in January durable goods was due entirely to a reversal in aircraft orders, and core capital goods orders rose by the most in five months. The durables data thus add to a string of strong economic data for January and suggest while manufacturing activity may be set to weaken further, it’s not collapsing. More Reprieve than Reversal in Manufacturing Contraction The 4.5% drop in durable goods orders for January has as much to do with the volatile aircraft component as the 5.1% gain did in December (chart). Indeed, nondefense aircraft orders slid 55% in January after surging 106% the month prior. This component is notoriously volatile, which is why we typically exclude it, along with defense orders, to get a clearer read on private-sector demand. To that end, and through the whipsaw effects of the headline order figures, core capital goods orders rose 0.8% in January after two consecutive monthly declines to end last year. READ FULL ARTICLE>>