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Re: ThoughtsWASHINGTON (MarketWatch) -- December orders for durable goods handily beat market expectations, rising 5.2%, led by aircraft and defense capital items, the Commerce Department reported Tuesday.
Orders for new durable manufactured goods increased in most sectors last month. It was the biggest gain since July. Read full report.
Excluding the 11.3% growth in transportation goods, December orders rose 2.6%, the first gain since September and the biggest since July.
The December increase far exceeded economists' expectations of a 2.2% gain. See Economic Calendar. Another sign of strength was the upward revision to November orders, which gained 0.5% rather than the previous estimate of a 0.1% gain.
Economists said it was hard to gauge how the report would impact the Federal Reserve decision on interest rates. The Fed's rate-setting committee was slated to begin a two-day meeting later Tuesday. See complete Fed coverage.
Economists said the sharp increase in durables was encouraging and certainly didn't have a recessionary feel. But they said they will await the Institute for Supply Management report on January manufacturing, to be released on Friday, before drawing too many conclusions.
Two factors combined to push up orders in December.
Economists at BNP Paribas said Boeing Co. (BA:
BA 80.70, +3.10, +4.0%) booked orders for 287 planes in December, up from 177 in November.
The other big jump came from defense orders, which had fallen sharply in November as the Defense Department did not yet have the authorization to increase spending for the new fiscal year, according to economists at BNP Paribas.
As a result, there was a rush in December for new defense orders, such as aircraft, which rose 138%.
Results were strong even outside these two sectors: Economists at RBS Greenwich Capital said excluding the defense and aircraft industries, durable goods bookings were up a solid 1.9%, well ahead of their expected 1.2% gain.
Orders for core capital equipment -- the kind of goods producers invest in to build their productive capacity -- rose 4.4% in December, the biggest gain since March and the first increase since September.
For all of 2007, durable-goods orders rose 1%, cooling from 2006's 6.3% pace.
Durable goods are manufactured products designed to last three years or longer. Because of that durability, orders and shipments of these big-ticket items are typically very sensitive to the ups and downs of the business cycle, adding to their value as a leading indicator of economic activity.
Shipments of durable goods, however, fell 0.1% in December, the second straight monthly decline.
Inventories rose 1.1% in December and unfilled orders, which are a signal of future production, increased 2.5%.
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