Most people don’t really care about something called “The Durable Goods Report.” Even financial media moved on in a couple of seconds.
But you should know why this morning’s report was a big deal.
First of all, Durable Goods are goods that are big and heavy and last a long time. Factory parts, engines, planes, cars… all big stuff.
For the last couple of months, folks on Wall Street have been passing along this chart, showing the ugly year-over-year change in quarterly core durable goods growth. Core durable goods exclude transportation, so this chart really is a good look at business big equipment investment.
The premise was that businesses were flipping out about the fiscal cliff, and holding back investment spending. It was a sign that “uncertainty” was rearing its ugly head, and going to take down the economy, just as thinks seemed to be getting better.
But today’s Durable Goods Report beat expectations, and in particularly that “core” number was very strong.
Millan Mulraine of TD Securities explains:
Core capital goods orders was also up during the month, rising 1.7% m/m, which was also ahead of the market consensus for a 0.5% m/m drop. Despite the improvement, the 3-month annualized pace of core orders is down a whopping 15.6% in October, though this is slight improvement on the 23.8% decline recorded the month before.
Obviously the 15.6% year over year drop is not great, but the direction is exactly the opposite of what people were worrying about. Things are improving going into the end of the year, not deteriorating.
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