Consumers may be worried about a downturn, but business keeps buying. Orders for durable goods jumped a larger-than-expected 5.2 percent in December. A quick run-down on the Commerce Department's report: Orders for "core" nondefensive capital goods, which exclude aircraft, increased in December by 4.4 percent, after falling 0.2 percent in November. December shipments of these goods rose by 2 percent, after increasing 0.2 percent in November. Civilian aircraft orders rose by 11.7 percent; machinery orders—most likely driven by farm equipment and power-generation equipment—jumped 7.6 percent; computers and electronics rose 4.6 percent. On the downside, motor vehicles and parts dropped by 2.3 percent.
Writes Brian Bethune, an economist with Global Insight:
Overall, the December report is a welcome dose of good news, as it suggests that business investment in equipment and software likely moved forward in the final quarter of 2007, albeit at a very moderate rate....Computers, farm machinery and civilian aircraft remain relatively strong, motor vehicles are weak, and construction machinery and heavy trucks are in deep recession. Given this wide dispersion across industries, we will likely continue to see a considerable amount of month-to-month volatility in orders. The outperforming industries are primarily being driven by strong demand overseas, so this does not alter the picture of relatively tepid domestic business equipment demand at the end of 2007.
Mike Englund of Action Economics weighs in:
The robust array of figures...effectively negates signs of weakness in the November data, which economists at the time feared may reflect the start of a sharp downward trend in business spending that would ripple through the economy....the big gains for orders, inventories, and equipment buck fears that credit market turmoil has spooked business managers."
